How to File Articles of Incorporation for Your Nonprofit
Once you decide that you are ready to take the leap and start a nonprofit, your first step towards making it official will be filing organizational documents with the state you want to organize in. What these documents are called varies by state as do the requirements. In Maryland, we file Articles of Incorporation for a Non-stock Corporation (“Articles”). You can either draft your Articles using the examples found in your state’s statute or use a form. The form you will use depends on which state you choose to incorporate in, but regardless of state, you should be able to find the forms on the Secretary of State’s website for your state. Here’s what that looks like in Maryland. We will have a database of links up soon, but in the meantime, send me a message if you need help finding information for your state.
You may decide to retain an attorney to assist you with this process. You absolutely should do so if you have questions or don’t want to do this yourself. Even if you do hire a lawyer, it’s important to understand the process and to have a good understanding of any document with your signature on it. In my experience, people don’t always ask their lawyer all the questions they should because they are watching the clock!
Articles of Incorporation are creatures of state law and most, but not all, states require that they be filed in order to raise funds in that state. Regardless of whether your state requires it or not, the IRS will ask you to submit your organizational documents for review when you apply for tax exemption under Section 501(c)(3) of the Internal Revenue Code. One of the purposes of requesting these documents is to ensure that the nonprofit is organized exclusively for charitable purposes. Your organization will be filing tax returns (Form 990) each year. The IRS will use that return to verify that your organization’s activities are consistent with the organizational documents they have on file for you. If your nonprofit decides to change its mission down the road, in addition to amending the organizational documents and obtaining board approval, you are required to report that change to the IRS on your Form 990. Of course the purpose must still be exclusively charitable.
Organizational documents ask for basic information like the name, corporate address, number of directors, and who will serve as the registered agent. Let’s breakdown these seemingly simple questions:
How to Name a Nonprofit
Before you get too attached to the name you have chosen, be sure to do a search in your state’s database. In most states, you can complete a name reservation form to hold a name that isn’t already taken while you work through the formalities of the Articles. Keep in mind, even if the name you choose is available in your state, you may still share a name with another charity in a different state. While this is technically legal, a quick google search to make sure you don’t may prevent a headache later. You may find yourself facing a trademark violation issue if the name you choose is the same or too similar to another organization. Also, if, for example, you are in Maryland and share a name with a nonprofit in Virginia and want to fundraise across the border in Virginia later, you will have to register to do business in Virginia using a different name.
You may be the one who wants to trademark the name you choose, or your logo. In addition to having an attorney who is familiar with nonprofit issues, you should also have a good trademark attorney that you can reach out to as you build your team of experts.
Tax-Exemption Language for Nonprofit Organization
If you are seeking tax-exemption for your organization, in addition to meeting your state’s requirements, you must also include language required by the IRS in order to pass what is known as the IRS’s organizational test. You can attach this language as an addendum or fill it in directly on the form if space allows. When you click the link to the draft language I linked earlier, you’ll discover one of the best kept secrets about the IRS: their website is really helpful and has tons of information and courses you can take!
The information you are looking for on the IRS website isn’t always easy to find when you need it, so I’ll do my best to link them as we discuss specific issues, but know that they are there, they are free, and they are reliable because they are coming directly from the source.
Choosing a Board for a Nonprofit
We discussed this in the previous article, but it bears repeating. Choose your board wisely. Choose a size that fits your purpose, not too big and not too small. For purposes of the Articles, you need to include the minimum number of board members your state requires. If you add more board members, you can make changes in your bylaws later without having to go back and amending your Articles. In Maryland, you do not need to initially name the members of the board, just who will serve until the first meeting where the Articles are voted on or until successors are chosen. In other states, you need only name an incorporator. This can be a member of the board or your attorney. Again, check the requirements of your state of incorporation.
Filing Fees for a Nonprofit
Filing fees vary according to state. You will pay for these out of pocket initially, but keep the receipt for these fees and all other expenses related to setting up the nonprofit for reimbursement when you do obtain your tax-exempt status. Like everything else, reimbursement is not as simple as it seems. We will dive into the ins and outs of it down the road, but for now, keep all of your receipts for expenses incurred during the formation period understanding that what is deductible is a narrow category of business expenses. Be sure to go over any expenses that are in the gray area with your accountant or attorney prior to reimbursing yourself or anyone else. This is also a really good reason to have a treasurer on your board that has some experience with this.
Anything Else?
It depends. Be sure to check the resources in your state to determine if you have to do anything additional. A few states require publication after a nonprofit is incorporated. Others require applying for a business license.
Now you are ready to go. You will need Bylaws, and you should start thinking about them, but in order to incorporate you have what you need.
Make sure you retain a signed, stamped copy of your documents once they are filed. I suggest that you start creating a document management system. It can be as simple as creating a folder in your Google drive or a separate folder on your computer. You will need these documents over and over again, so keeping them handy and it will save time once you are in full swing!
