Some Legal Steps to Forming a Nonprofit
As I said in the beginning, this blog is meant to show you every step Project Create takes. Unfortunately, this also includes the boring, nitty gritty ones (read: anything that might require a lawyer).
Project Create’s transition from a thought bubble into a fully functioning business is a fairly complicated process. It involves quite a bit more than daydreaming about teaching Dolly Parton to paint, which I do. Daily. Alas, to ever meet Dolly, I need to take action and bring Project Create into legal existence.
Here are the general steps Project Create will be taking to become a legal entity:
- File Articles of Incorporation: This step is equivalent to the birth of a company. The document is filed with the Secretary of State in the state where the nonprofit will operate. In Louisiana this costs $60 for a nonprofit and usually has a 3-5 day turn around. Most states allow you to file these online and can be done in 10 minutes. When the state issues a certificate of incorporation, the two documents together give the corporation its legal existence. Information you will need: Company name, purpose, address, incorporators, and board of directors (which I will discuss in a separate post).
- File for IRS Employer Identification Number: This is the employer equivalent of a social security number. This can be done online and is free.
- File with IRS for 501(c)(3) status: This designation is the lifeline for a nonprofit because it gives an organization a few benefits. First, 501(c)(3) nonprofits are exempt from federal income tax. A second major benefit is that donations made to a 501(c)(3) recognized charitable organization are tax deductible for donors. Third, many federal, state, and local grant foundations will only award their grants to organizations with 501(c)(3) status. This filing can be done online and is bit more expensive ($850). It can take up to a year for a response.
- File for state tax exemptions: Louisiana has both state income tax and sales tax exemptions for federal 501(c)(3) recognized organizations. These filings can be done online and are free.
I will keep you updated as I complete these filings and Project Create becomes a living, breathing business. Also, look out for the next post on non legal steps (i.e. recruiting a board of directors, drafting a business plan, etc.).
The “Hold Your Horses” Disclaimer: Nothing in this blog is intended to be legal advice. If you are thinking about starting your own business, these are very important steps that should not be taken lightly. The internet is an amazing place and there are plenty of resources available on filing these documents. Please do enough research to ensure you are comfortable with the relevant legal jargon, or seek the help of an attorney.