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Nonprofit Formation

Nonprofit Formation. Basic Steps. Nonprofit Formation. What is the basic Idea? Vision? What do you want to do? What will be the structure? Nonprofit vs. For Profit. Tax-exempt Organization. Tax-exempt = Nonprofit Organization Attributes and limitations of each.

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Nonprofit Formation

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  1. Nonprofit Formation • Basic Steps

  2. Nonprofit Formation • What is the basic Idea? Vision? • What do you want to do? • What will be the structure? • Nonprofit vs. For Profit

  3. Tax-exempt Organization • Tax-exempt = Nonprofit Organization • Attributes and limitations of each

  4. First Steps to Create a Nonprofit • Georgia: $25 Name Reservation (optional), $30 to create; plus $40 newspaper notice • S. Carolina: $50 to file a nonprofit organization • All done via GA or SC State Secretary of State web site • SC: http://sc.sos.gov • GA: http://sos.ga.gov/index.php/Corporations/creating_a_new_entity

  5. Secretary of State filing • On-line filing info needed includes: name of the corporation, address of the corporation, email address, members or no members, registered agent, name of the Incorporator • Reserves the name of the corporation while IRS application is processing

  6. Federal IRS • IRS requires Articles of Incorporation • Organized for charitable, religious, educational and scientific purposes • Dissolution and Distribution of Assets • Notification of Acceptance

  7. IRS Next • Acceptance of the Articles of Incorporation • Application for an EIN (Employee Identification Number) • All on-line and no cost to this point

  8. IRS Next2 • Determine Structure of the Organization • Write by-laws; Board of Directors (at least 3 persons required), length of terms, meetings, reports, structure, conflict of interest policy

  9. IRS Next3 • Apply for Tax Exempt Status - Form 1023 • Determine Budget Parameters (Size of budget determines application fee) • Annual Budget less than $10,000: Form 1023EZ, $400 fee • Annual Budget more than $10,000: Form 1023, $850 fee

  10. IRS Form 1023 • Go to IRS web site; Print blank Form 1023 to complete • Form 1023 to illustrate; Form1023EZ is truncated version for those that qualify • Names and addresses of BOD members, Compensation, Contracts or Consulting agreements with BOD members, List of Assets, Annual Budget next three years

  11. IRS Form 1023 Cont. • Budget must include expected income and expenses. • Additional Questions: Past, present and future activities; Planned fundraising activities; Successor organization designated • Answers must include specific details

  12. IRS Form 1023 • Mail completed Form 1023 • Expect IRS response in 3 - 6 months • Result is 501(c)(3) status for the new nonprofit corporation • Note: IRS recognizes more than one type of nonprofit corporation. 501(c)(3) is common

  13. Filing Taxes • Must file 990 Return annually -- even if no income is generated. • Failure to file 990 Return for three consecutive years will terminate tax-exempt status and requires re-creation of the corporation, including re-payment of the fee to the IRS. • Failure to file also reflected in SOS data base

  14. Summary • Nonprofit corporation creation takes significant effort and time for IRS response • Pre-plan all info needed to complete IRS Form 1023 • Annual tax returns mandatory • Creation of a for-profit organization may include many of the attributes desired without the cost and time delays of a nonprofit creation. Payment of taxes is key!

  15. BackUp • How-to info

  16. IRS Resources • If you intend to apply to the Internal Revenue Service (IRS) for recognition of federal tax-exempt status as a charitable organization under section 501(c)(3) of the Internal Revenue Code, your articles of incorporation must contain certain provisions. For more information, visit www.irs.gov/Charities-&-Non- Profits/Charitable-Organizations/Charity-Required-Provisions-for-Organizing-Documents on the IRS website. To learn about the general requirements for federal tax-exempt status, visit www.irs.gov/charities, or download IRS Publication 557, Tax-Exempt Status for Your Organization. Additional information and resources can be found at www.stayexempt.irs.gov/Resource-Library.

  17. Registering a Charity - SC If you have never registered in the state of SC: • - You will be required to provide the charity name and the IRS EIN number.  • To resume or renew a charity registration: • - Log in using your Charity ID and Registration PIN provided on the registration reminder letter that was mailed or e-mailed to you. • - You must have your completed IRS Form 990 or annual financial report, or have requested a filing extension from the Secretary of State’s Office.

  18. Angels and Scrooges - SC • SC Secretary of State monitors charities and provides public access to data; Annual highlights • Charitable donors may research organizations registered in South Carolina by visiting the Secretary of State’s website at www.sos.sc.gov. To review an organization, select the Charity Search button to learn a charity’s total revenue, program expenses, total expenses, net assets, and fundraiser costs. The website even calculates the percentage of total expenses that the charity has devoted to its program services.

  19. Resources - SC • SC Nonprofit Corporation Act: http://www.scstatehouse.gov/code/t33c031.php • http://www.charitynavigator.org • http://www.scanpo.org

  20. Articles of Incorporation - GA • Articles of incorporation must include the information described in O.C.G.A. §§ 14-3-202 (nonprofit corporation). Articles may be filed online or mailed to the GA SOS Corporations Division. Articles mailed to the office must be submitted on white 81⁄2x11 paper. An incorporator named in the articles or an attorney in fact must sign articles of incorporation. The signer(s) should indicate in what capacity he or she is signing. The signature does not need to be notarized. • Filing of Articles of Incorporation and Data Transmittal Form 227: For filings not submitted online, the original and one copy of the articles of incorporation, a completed Transmittal Form 227, and the $100.00 filing fee should be mailed or delivered to the Corporations Division.

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