Congratulations, you have done your research and officially decided to become a registered nonprofit organization! We are here to answer one question: what do you need to do to make your nonprofit dreams come true?
To register your nonprofit, you will need to take a few key actions and file a couple of applications on a state and federal level. Don’t fret, we are going to guide you through this process!
In this article we will cover:
- Nonprofit Bylaws
- Establishing a Board of Directors
- Filing Articles of Incorporation
- Form 1023
- 501(c)(3) Application
- Register to Solicit Donations
- Seek Help
Let’s dive in!
Bylaws are the internal operating procedures of your organization, and should be as detailed as possible. The more detailed, the easier it will be for your organization to run smoothly. We have broken down the components of nonprofit bylaws, but here are some additional tips to make the process easier.
The very first thing you should do to register your nonprofit is to give it a name. You will need to use this as your official name in your bylaws (and all of the other documents to follow). We know this can seem intimidating, and you want to create the perfect name for your organization. In choosing a name, we recommend to consider your branding, target audience, and wording.
Once you have chosen options for your name, you need to see if any other nonprofits already have any of your options. To do this, you can search for the names here. After verifying, you can move forward to narrowing down your options.
Pro Tip: Take it to the streets! Not literally of course, we just mean to test out potential names with the nonprofit community. You can do this either through surveying Facebook groups, or even emailing a group of potential supporters.
Once you have decided on one name, consider making it official by trademarking it. This will protect you from any confusion and malpractice. By trademarking your name, you are avoiding the possibility of supporters finding another nonprofits information instead of yours, or donating to the wrong organization.
Another benefit is that trademarking ensures that you have legal protection against infringement. Essentially, this means if someone tries to use your name under false pretenses you have the right to legal action if needed.
In addition to all of this, trademarking can add a level of sophistication to your name. After you have registered your name as a trademark you can add the "®" symbol, which indicates that your organization is federally registered. This will bring confidence to potential donors and members by letting them know that they are not just giving their time and money blindly.
Guide for Members
No matter if your nonprofit revolves around members or not, you need to mention members in your bylaws. If you do not have members, or do not plan to have members, you simply need to state that it is the case.
If your nonprofit does have members, your bylaws will act as a membership guide. Think of it as an employee handbook. If they ever have a question about what they are entitled to, how much dues are, how this is broken down, and any membership rules, they should be able to find all of this information in your bylaws document.
This is especially important for social organizations with limited membership, as generally there will be rules relating to conditions of membership. For example, sororities and fraternities list all membership rules in their bylaws. If your organization revolves around a specific group of people, such as people living in a certain local, you need to list these requirements.
You should also list the process of what happens if members do not abide by the bylaws. Do you need to have a two-thirds majority to terminate membership? Do they simply lose membership status by not meeting certain criteria? Be sure to include all of this information in the membership section!
Guide for Board of Directors
As with members, the Board of Directors should be able to use your bylaws as a guide to their management. This section needs to be as specific as possible on the rules concerning delegation of work, responsibilities, process of appointing and adopting board members, and voting rights and procedures. Essentially any organizing information that you have should be included.
Modifying Your Bylaws
Keep in mind that your bylaws can be changed at any time as long as the procedure to enact said changes are detailed in the document.
If you are just starting your nonprofit, you should know that you will probably need at least one year to know what you should write in your bylaws. To start, you should include all of the information you have, but after a year you will really be able to see what works for your organization and what doesn’t. Don’t stress about this, like we said, modify later!
In general you will need a two-thirds majority to approve any changes in bylaws, so you don’t want to be modifying your bylaws constantly. In addition, you are required to report any major changes yearly in Schedule O of Form 990. If you are continually modifying your bylaws it will be hard to keep track of these changes.
Pro Tip: Create a document for bylaws suggestions as you go, and then when the time comes you can decide which changes you want to make. We recommend to only change your bylaws once a year to avoid confusion and to save your organization precious time.
Establishing a Board of Directors
After you have established all of the information you need about what your board of directors will consist of, you need to actually recruit a board!
Your board is the backbone of your organization, and without their support you will not be able to keep making a positive impact on the world! This may sound a bit harsh, but it is true, and that is why we cannot stress enough that recruiting great board members is key. Don’t worry, we have plenty of tips to help you along the way!
The first step in this process is the recruitment of board members. You should treat this like you would a hiring process. Try to find dedicated individuals that share your passion for your mission, and have the experience that you need to support your nonprofit.
Keep in mind that board members cannot be paid if they have voting rights, and therefore you need to find people that will be passionate enough working on a volunteer basis. This will take a lot of time, and that is okay. It is better to take time to find the right board members than to choose someone that is not a good fit and will end up setting you back in the long run.
Board engagement is just as important as recruitment. Why? Because without it your board will not be coherent and will have a hard time working together.
To increase initial engagement you should provide training to board members on how they can work together, and how they should interact with your staff members or volunteers. This training will change depending on if your board is a working board or a governing board. Some examples of training that you can include for both would be things like personality tests, training to work in diverse teams, or on how to provide feedback.
Your nonprofit should also consider team building activities to increase team spirit amongst your board members. These individuals are going to have to vote on topics, and sometimes this can get personal. You want to avoid creating tense situations as much as possible. To do this, schedule times to volunteer together, or step away from work all together and opt for something like an escape game, rope climbing course, or even just some coffee and (nonwork related) conversation.
Filing Articles of Incorporation
Next on the list are the articles of incorporation. Your articles of incorporation serve as your organizing document, which the IRS requires when you are registering your nonprofit. They are your legal forming document because they enable you to act as a legally formed entity.
In order to file your articles of incorporation you will need to have everything we have already mentioned in this article. It is also important to note that your name on your bylaws and articles and incorporation should match to avoid confusion when submitting your registration documents.
Keep in mind that depending on your state, your articles of incorporation will need to include IRS language.
Lastly, be sure to file with your state. Articles of incorporation are filed on the state level, not federal. As we said, each state has different requirements, so be sure to read up on them before you start writing!
This is the official form that you have to file with the IRS to become a 501(c)(3) tax exempt organization. If you are another type of nonprofit organization, you can consult the IRS resources to see which form you will use in replacement of the 1023 (in most cases this will be a 1024, or no form at all).
Form 1023-EZ is considered easier to file because of its length and relatively inexpensive price. The 1023-EZ is only 3 pages long, compared to the standard from which comes in at 40 pages. If this wasn’t reason enough, the 1023-EZ is $275 to file, compared to $600 for the standard form.
I know what you are thinking, sign me up for the EZ version! However, there are some criteria that your organization must meet to be able to file for this option. The IRS asks you to fill out an eligibility worksheet before filing to ensure you meet these criteria. If you do have to file the standard form, don’t fret, the IRS has provided you with detailed instructions to do so.
Pro Tip: We have broken down the 1023-EZ line by line for you to make it easier to get through. We also provide some helpful tips and tricks to filing this document.
Lastly, this form should be filed online at www.pay.gov along with paying the correct filing fees.
The 501(c)(3) application is the main part of registering your nonprofit, but thankfully it is mainly just collecting info you have already prepared.
To be considered as a tax-exempt organization you will need to file Form 1023, and ensure the following aspects are included:
- Firstly, to file this application you will need to be a legally formed entity, i.e. to have already filed your articles of incorporation or organizing documents with your state and have certification of the approval. According to the IRS, the document must be an exact copy of what is on file with your state.
- At that point you can apply for an employer identification number (EIN), which you will need to complete form 1023.
- As part of the 1023 you will need to complete the financial information about your nonprofit. You will get this information from your income statement and balance sheet.
- Then you will need to add your articles of organization as a supplement to the 1023. This proves that your nonprofit is a legal entity. For most nonprofits this will be your articles of incorporation. If you are not a corporation, the IRS requires your organizing document to include the name of the organization, its purpose, the date the document was adopted, and the signatures of at least two individuals. The bylaws can also be considered your organizing document if you include this information.
- Lastly, you need to add your bylaws if they are used as your organizing document or if they have already been adopted and approved.
Congratulations, you made it through the process of registering to become a nonprofit organization! But not so fast, you have one more stop before you start your donation campaigns.
Register to Solicit Donations
Now that you have registered to become a tax-exempt organization, you need to register with your state to solicit donations. Not all states require you to do this, but most do.
The tricky part of this is that if you collect donations in any state, you may need to register with that state. For example, if you are a nonprofit based in Florida and you create an online donation campaign that collects donations from all around the United States, you might have to register to solicit donations from each state where you collect a donation from.
Some states allow you to collect a certain amount without registering, but you will most likely not know how much you will collect from each state.
Be sure to check if your state requires you to register, and any other states that you are collecting donations from. Depending on how much it costs and what the process is to register, it might be best to limit your donation campaigns to certain states. One way you can do this is to add a disclaimer on your donation page that you do not accept donations from certain states.
If your organization is large enough, and you think it is worth it to register in all states, by all means do so! Most organizations that choose this option have one person dedicated to submitting these applications.
To check how to stay in compliance with these regulations, take a look at the white paper Harbor Compliance published.
Our last piece of advice for you is to seek professional help! We cannot stress enough how valuable it is to have a professional review all of your documents before submitting them.
The process to register your nonprofit can be time consuming, and submitting incorrect information will prolong it even more. To give you an idea, to get your tax-exempt application approved it takes an average of 90 days. That means if there are any mistakes you will have to go back and correct them, and then wait again for a response.
The best way to avoid this is to solicit legal advice before filing the paperwork, especially your articles of organization and the tax-exempt application. Don’t worry, there are several options to choose from.
- An attorney: You can find an attorney by searching "nonprofit attorney" and your city, or, even better, reach out to your network. You can publish on LinkedIn, or even on Facebook groups to see if anyone in your network has experience working with a nonprofit attorney, or an attorney that works pro bono.
- Legal aid: Some legal aid centers provide assistance with nonprofit organizations, so be sure to find your local legal aid and inquire as to if they do. A lot of legal aid centers are nonprofits themselves, so they will have experience working with these documents.
- Law school clinic: these are the beauty schools of legal practice. They are usually free, and are operated by second and third year law students. All of this work is checked by a professional lawyer, so you can be sure you are in good hands. We highly recommend this option if you have a law school in your area, just be sure to check in advance to be sure to secure a spot!
Using these services can save a lot of time and money in the long run. You might even be able to get these services for free, so why not give it a try. For more information on how much it costs to start a nonprofit, check out our detailed article.
That is it, you made it! You now have all of the resources you need to register your nonprofit. Be sure to check out the longer articles we have linked in this article to give you a deeper understanding of these subjects.
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