REALTOR® Magazine Online: Steps to Incorporate and Seek Nonprofit Status

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Steps to Incorporate and Seek Tax Exempt Status

Draft and file a certificate of incorporation with the appropriate governing body in your state, most frequently the secretary of state or attorney general. Remember to draft these articles of incorporation broadly enough to allow future expansion of your organization’s interests and service.

Enlist an initial board of directors or trustees. You may want to build your founding board from among personal friends or from among people in the community who are interested in supporting your cause.

Write mission and vision statements. Frequently, you must submit these documents to obtain formal approval of your organization’s nonprofit status. So, treat these documents with due reverence.

Document organizational bylaws and policies. This procedure may seem overly formal when your organization is young and small, but it will ultimately allow it to grow in a logical and orderly basis.

Get your employer identification number (EIN). You'll need this number in order to be recognized as a corporation by the Internal Revenue Service, to open a corporate checking account, and to pay taxes related to any employees you may hire.

Open a bank account. You’ll have to decide who to authorize to access to the funds. On the one hand, be sure your organizational funds are protected, but on the other hand, don’t create so elaborate a financial situation that it’s difficult to pay day-to-day bills.

File for federal tax exemption. This process could take some months to complete, but at the end of the line, your organization will be free from paying federal income taxes on income related to its purposes, and your donors will be able to claim income-tax deductions for contributions.

Determine state and local tax obligations. It’s frequently a separate matter to establish state and local tax exemptions. You should pursue all avenues of exemption.

Develop a business plan and a fundraising plan. Having official plans of how your organization will operate and how it will ensure its continuation will ultimately allow you to pursue your principal purposes to their fullest extent.

TIP: Yes, yes, yes. It’s certainly possible to operate a nonprofit organization in a less complicated manner. But if your organization is successful and productive, you’ll very likely need to incorporate and seek tax exemption eventually anyway. Why not now?

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