Writing and filing the Articles of Incorporation is a crucial, fundamental step to establishing a new nonprofit organization. You may get a little scared when you see all of the legal terminology, but don’t worry! We are here to help clear up any confusion you may have and help simplify the process.
Today, we will go over these four topics to help you get started:
- What the Articles of Incorporation are and why they are important
- What will you need before writing your Articles of Incorporation
- What will need to be included in the Articles of Incorporation
- Where to file your Articles of Incorporation
Let’s dive in!
What the Articles of Incorporation are and Why They are Important
The Articles of Incorporation is an organizational structure that is required for the incorporation process. Incorporation is simply the formation of a new corporation, which can vary from businesses to nonprofit organizations to sports clubs.
An organizational structure is required for all nonprofit organizations to complete in order to apply for tax-exempt status with the IRS. Most commonly, nonprofits are a corporate entity, and as such must create and file the Articles of Incorporation with their state before applying to be tax-exempt with the IRS.
Aside from being a step along the way to becoming a 501(3) tax-exempt organization, there are many added benefits of incorporating your organization.
- It secures the name you choose for your organization. When you incorporate, your name is registered with the state you operate in and is therefore secured.
- It limits any personal liability. Members, board members, and director’s liability are limited within the clauses of the articles.
- It adds credibility to your nonprofit. By being a registered and incorporated organization, you add reputability to your organization and volunteers, donors, and others may be more likely to participate.
The Incorporation process is a necessary administrative step, but thankfully, it is not too complicated. It is a short document that if done correctly, will only need to be filed once. However, if done incorrectly or if it is incomplete, you may have to get it amended which will use up precious resources.
Although we give you the relevant information in this article for the filing process, we highly suggest that any document that needs state or federal approval is reviewed by a registered attorney who is specialized in tax-exempt organizations. They are the experts and will tell you what needs to be done!
What You Will Need before Writing Your Articles of Incorporation
Before you can write and file your Articles of Incorporation, there are a few steps that should be completed. Within the articles, you will have to expand on the following topics, so if you haven’t completed these tasks, please do so before you begin the filing process.
- Address: You must have an address for your organization in the state you are operating in. You will need to include this address in the Articles of Incorporation, along with a mailing address if they are different.
- Board of Directors: You will need to state in the articles that you are governed by a board of directors and list said directors. Having your board already in place will simplify this process.
- Bylaws: Having your bylaws already written will allow you to refer to them while drafting your articles to ensure there is no conflict or of IRS rules.
- Name: As noted before, Incorporating will register and secure your organization’s name. However, you need to ensure it is available first! The name must be available in your state. To conduct a name search, go to your Secretary of State Office website and do a Business Name Search. In most states, you can file a name reservation for your organization if you wish to place a hold on your selected name until you incorporate. This process can take some time, so we recommend doing this as early as possible.
What Will Need to be Included in the Articles of Incorporation
Every state is different and may have different requirements for Incorporation. You will need to consult with your local authorities to determine what language and requirements you must include for your state (don’t worry, we give some more information about this later on in the article).
After your Articles of Incorporation has been approved by your state, you will use it to file your 1023 form. While some states do not require IRS language, when it is time to file for tax-exempt purposes, you will need it. If you do not have the required language, the IRS will most likely reject your request and you will have to amend your Articles of Incorporation, costing you time and money.
We always believe that it is better to be safe than sorry, we recommend that you do more than the minimum the first time and make sure all aspects are included so you don’t have to go back and change it down the road.
We have taken the IRS regulations and simplified everything down as much as possible. However, this is not a template. We said it before and we will say it again, please have your Articles of Incorporation reviewed by the appropriate party before filing as it will save you a headache down the road! All of the IRS language we quote can be found here, and we also consulted this website.
With that being said, let’s get started! The IRS suggests that you start your article with the following statement:
- Articles of Incorporation of ____. The undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of ___, do hereby certify:
Article I Name
Here is where you will include the name you have already selected and potentially reserved, as we mentioned earlier. The IRS website suggests that you write this sentence as follows:
- The name of the Corporation shall be ____.
In this section you state the duration of your organization, which should be perpetual. The IRS does not usually grant tax-exempt status to temporary organizations.
An example of how to write this sentence:
The period of duration of the corporation is perpetual.
The duration of the corporate existence shall be perpetual until dissolution.
Article III Purpose
In this article you can state the actual purpose of your organization. The purpose must fall in line with the 501(c) guidelines, which means you must be organized for charitable, religious, educational, or other approved reasons (more on this below). Your organization must fall under one of these purposes, otherwise your application will not fit the requirements for the 501(c), which allows you to become tax-exempt.
You can include the information from your mission statement (who you serve, how, and why), as well on specifics of your programs offered, if you wish to enlist volunteers or collaborate with other organizations, etc.
Pro tip: It is important that you get the point across about your organization without being too specific. If you expand in the future, you may have to amend this article if you were too detailed.
In this section, you must include the following required language to be approved by the IRS:
- Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
Article IV Nonprofit Nature
This section is arguably the most important when it comes to filing with the IRS, because there is a lot of required language that must be included in order to be approved. As we have mentioned before, the failure to include the required language can result in a rejection of the Articles of Incorporation and you will have to amend them to correct it.
This section includes exemption requirements, a dissolution cause, and a personal liability statement. Please note that others separate out the different elements of this section into their own articles, but for our example, we have included them all here under Nonprofit Nature. Consult your state and lawyer to decide on the best way to organize these clauses.
Exemption requirements are necessary for 501(c)(3) organizations as it ensures they do not participate in anything that goes against the IRS rules, such as influencing legislation. Below you will find the required language for these requirements.
At all times the following shall operate as conditions restricting the operations and activities of the corporation:
- No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purpose set forth in the purpose clause hereof.
- No substantial part of the activities of the corporation shall constitute the carrying on propaganda or otherwise attempting to influence legislation, or any initiative or referendum before the public, and the corporation shall not participate in, or intervene in (including by publication or distribution of statements), any political campaign on behalf of, or in opposition to, any candidate for public office.
- Notwithstanding any other provisions of this document, the corporation shall not carry on any other activities not permitted to be carried on by an organization exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code or corresponding section of any future tax code, or by an organization, contributions to which are deductible under section 170(c)(2) of Internal Revenue Code, or corresponding section of any future tax code.
The IRS required you to include a dissolution cause in the case your organization is dissolved. On the state level, some states allow you to distribute your assets upon dissolution, so check with your state or lawyer for the proper language to add.
This is the language required by the IRS for the dissolution clause:
- “Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.”
This section is another one of the benefits of incorporating your organization as it limits personal and financial liability for those associated with your organization.
The wording should be as follows:
- No member, officer or director of this corporation shall be personally liable for the debts or obligations of this corporation of any nature whatsoever, nor shall any of the property of the members, officers or directors be subject to the payment of the debts or obligations of this corporation.
Article V Board of Directors
This article is where you define your board of directors. If your board is not complete yet, just add the initial board members. The IRS and most states generally require a minimum of three members.
You must include their full names.
Article VI Membership
This article states if your nonprofit corporation will or will not have members, in terms of governance.
A member is an individual or business entity with a formal relationship to a nonprofit that has the right to vote on important matters.
Most nonprofits do not have members, and rely on their board of directors and bylaws for governance. You most likely do not have members. However, it is important to verify with your counsel on this.
Example sentence if no members:
- (Name of Organization) shall have no members. The management of the affairs of the corporation shall be vested in a board of directors, as defined by the corporation’s bylaws.
Article VII Amendments
It is likely that you will need to amend your Articles of Incorporation some point down the road. In your bylaws, you will set up a process for amendment. It is a good idea to include this process here.
For example, if in your bylaws it states that amendments can be made by the board with a 2/3 majority vote, you can write something like this:
- Any amendment to the Articles of Incorporation may be adopted by the approval of a two-thirds (2/3) of the board of directors.
Article VIII Addresses
This is the section where you will need your address. As mentioned, the address should be in the state you are incorporating in. Please add your physical address and mailing address.
Article IX Registered Agent
A registered agent is simply a person or entity appointed to accept service of process and official mail on your organization’s behalf. This can be you, a board member, or anyone else involved in your organization. Please note that their address should be in the state you are incorporating in.
You can write this section as follows:
- The registered agent of this corporation shall be:
(Name and address)
Article X Incorporator
The incorporator is the individual who completes, signs, and dates your Articles of Incorporation. This article should include their name, address, signature, and the date. Please note that the incorporator does not have to be a board member or anyone else involved in the organization.
Here is an example:
- In witness whereof, we, the undersigned, have hereunto subscribed my name for the purpose of forming the corporation under the laws of the State of (insert state) and certify I have executed these Articles of Incorporation this _____ day of _________, 20__.
- Incorporator Name _______________________________________
- Incorporator Address, City, State, ZIP _______________________________________
- Incorporator Signature ___________________________
If you are using this as your final article, please include the signatures of your registered agent and board of directors as well.
Where to File the Articles of Incorporation
As we have mentioned, the Incorporation process happens initially on the state level. You should incorporate in the state you are operating in. It is important that you define what state you will be filing in before drafting your articles, because each state may have different requirements and language that must be added.
Please note that it is not advisable to incorporate in a state you are not operating in because the filing fees may be cheaper. You will still be required to incorporate and apply for separate tax exemptions in the current state you are operating in (and each state in which you conduct business), so you will end up paying two filing fees!
In most states, the secretary of state oversees this process. Check your state’s websites, as they usually offer articles of incorporation templates and instructions. Check out this list from Harbor Compliance to find your states’ filing office.
The cost for incorporation can vary from $50 - $400 depending on the state. If you are interested in learning more about how much it costs to start a nonprofit and filing fees, check out this article!
We hope this has given you the information you need to get a better understanding of the Articles of Incorporation and continue the process of starting your new nonprofit!
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