How To Form a Nonprofit Corporation

Nonprofit corporations, legally defined as 501(c)3 corporations, are businesses which do not distribute excess income to shareholders or members.   Instead the money generated by these corporations is intended to provide services and programs for the public.  To be an effective nonprofit corporation, the organization must satisfy a public need and benefit the community.  Funding for nonprofit corporations usually comes in the form of government grants, corporate sponsorship, or endowments.

First, determine the type of service or program your nonprofit corporation will offer or perform.  Assess the goals of your organization and reduce these goals to a coherent, written mission statement.  This mission statement, which can be revised as the organization grows, should define what members of the public your nonprofit will serve, list the values of the nonprofit, and explain how the corporation will benefit the community.

Next, gather people who support the vision of the nonprofit corporation and are willing to volunteer their time to accomplish the corporation's goals.  As a general rule, most states require a nonprofit organization to have a governing board that consists of at least three members. Therefore, you will need to recruit at least two other people to become board members before you apply to have your nonprofit corporation recognized by the government.  The governing board of the organization will be responsible for any major decisions so select members carefully.

The board of the nonprofit corporation is responsible for drafting the articles of incorporation and by-laws which govern the organization. The articles of incorporation for your nonprofit corporation must list the formal name of the organization, its principal location, and its purpose.   The articles of organization must be filed publically with the state government either at the secretary of state's office or with the local court. The IRS has set criteria by which they judge the status of a nonprofit corporation.  Be sure that the charitable purpose of your nonprofit corporation is clearly outlined in the articles of incorporation to ensure tax-exempt status is granted.  The by-laws of the nonprofit corporation direct how the organization will conduct business.  Some states also require you to file the organization's by-laws with the secretary of state.

Once the articles of incorporation are filed and the board has approved the corporate bylaws, the nonprofit corporation can apply for both a Federal tax identification number and tax exempt status from the IRS.  IRS forms 1023 and 8718 must be completed before tax exempt status will be granted.


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