One of the most frustrating aspects of incorporating a nonprofit organization is the number of forms the process requires.
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But no matter how overwhelming it seems, you need to remember that each form serves a purpose. The key to maintaining your sanity is to understand the role each form plays so that the forms serve you - instead of feeling like you are serving forms.
Keep in mind that most nonprofit forms fall into three categories: Incorporation documents, tax exemption applications, and registrations. Although you may run into a few exceptions along the way, if you make sure you have filed the appropriate forms in these areas the majority of your bases will be covered. Here are some of the specific forms you should expect to encounter . . .
Articles of Incorporation
The Articles of Incorporation document provides a legal description of your organization. The list of items that need to be described in this document include the organization's legal name, it's purpose and limitations, the names of the initial board members, a dissolution clause, and a few other clauses that are usually boilerplate in nature. Even though this is a document that is often created from scratch, there is no shortage of templates available on the internet to guide you through the process.
While the Articles of Incorporation describe the organization, the bylaws describe how your organization will operate. Typical nonprofit bylaws dictate the organization's relationship with its members (if it is a membership organization), the date of the annual meeting, the process for arranging special meetings, the number of board members and their term of office, a description of committees, and any special amendments that apply.
Nonprofit organizations are exempt from paying federal income tax under 501(c)(3) of the IRS tax code. This section of the tax code is so closely identified with nonprofit organizations that it's not uncommon for qualified nonprofits to describe themselves as 501(c)(3) organizations. To apply for this exemption, you will need to complete IRS Form 1023, Application for Recognition of Exemption. The IRS also recommends that you file Form SS-4, Application for Employer Identification Number, at the same time you file Form 1023.
State Tax Exemption
It would make perfect sense for state governments to accept a nonprofit organization's 501(c)(3) exemption as the only required qualification for exemption from state taxes. However, since you are dealing with government agencies, it should come as no surprise that many state governments require the completion of another form before granting state tax exemption. Since the requirements vary by state, you will need to contact your state tax department or legal counsel to learn which forms apply to your organization.
Most states also require nonprofits to take the additional step of state registration. Although this process seems redundant, it is typically painless - as long as you do it in a timely manner. Failure to register can send up a red flag with the state and cause no shortage of headaches for your organization.