Starting Your Non-profit
There are a few things you may want to consider when you're starting a non-profit in Connecticut, particularly if you're creating a 501(c)(3) organization.
Creating a Mission Statement
How you prepare your mission statement, and the information you include in it, will help you answer questions from future lenders, board members and employees. Create your mission statement by outlining what you want your non-profit to accomplish, then explain its purpose. Answer these six important questions: who, what, where, when, why and how? Lay out your company's objectives, activities and resources. Explain how and where it will obtain funding.
501(c)(3) and Other Types of Non-profits
Connecticut recognizes different types of non-profits. A 501(c)(3) nonprofit is exempt from federal taxation under the Internal Revenue Code. These are usually organizations that operate for charitable, religious, scientific and other similar reasons. They may include both public charities and private foundations.
There are also other types of Connecticut non-profits that don't receive tax-exempt status. Social welfare organizations, labor unions, farm bureaus, business leagues, and social and recreational clubs may also qualify for nonprofit status in Connecticut.
Considerations for Starting a Non-profit
When you're creating your Connecticut nonprofit, here are some potential advantages and disadvantages to keep in mind:
Advantages:
- Connecticut not for profits are exempt from Connecticut income tax.
- Non-profit corporations may provide their shareholders, directors and officers with protection from liability
- Some Connecticut nonprofits have advantages in fund raising, especially 501(c)(3) non-profits.
- A non-profit corporation can outlive its original organizers, unlike partnerships and associations.
- Not for profit organizations may be exempt from property taxes on all or part of their real property.
Disadvantages:
- Although a non-profit is good for managing large numbers of members, it may not be appropriate for you if you want to retain control of your organization.
- Non-profits require more time and money to create and maintain than sole proprietorships or partnerships.
- Grants from some federal and state government organizations may require non-profit status.
Requirements and Mandatory Forms for Creating a Non-profit
- You must file a Certificate of Incorporation for a Nonstock Corporation with the Connecticut Secretary of State in order to form a nonprofit in the state.
- You must submit an Organization and First Report to the Connecticut Secretary of State within 30 days of your corporation's initial board meeting.
- If your corporation is a 501(c)(3) nonprofit, you must submit Form 1023, Application for Recognition of Exemption, to the IRS.
- For exemption from Connecticut state income tax, you must file Form REG-1, Business Taxes Registration Application, with the Connecticut Department of Revenue Services. This filing should include a letter from the IRS confirming tax-exempt status
- Submit Form PCUREG-01, Charitable Organization Registration Application, along with a copy of your Certificate of Incorporation, with the Public Charities Unit of the Connecticut Office of the Attorney General.
How to Retain Your Non-profit Status
After forming your not for profit organization, you must follow specific guidelines to retain your nonprofit status.
- Nonprofit corporations must file an annual report with the Connecticut Office of the Secretary of State on the anniversary date of filing their Organization and First Report.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings. These records should be kept at the nonprofit's registered office.
- Nonprofits must file an updated Form PCUREG-01 with the Office of the Attorney General five months after the end of their fiscal year.
What it Costs to Form a Connecticut Non-profit
The current fee for incorporating a non-profit in Connecticut is $40.
Accountability and Ethics
Board members should avoid conflicts of interest. They must disqualify themselves from decisions if a conflict is present.
Nonprofits should respect the intent of their donors in areas such as anonymity and the use of gifts. Written agreements can help avoid disputes about how gifts will be used.
Nonprofits operate for public purposes with public support, so information regarding the nonprofit's mission activities and finances should be available to the public.
Applying for Grants & Loans
Grants and loans from federal, state and private sources are a major source of funding for Connecticut non-profits. It's important for non-profits to keep money received from grants separate and apart from the non-profit's general fund.
Connecticut & National Non-profit Resources
Connecticut Association of Nonprofits: The mission of the Connecticut Association of Nonprofits is to support and strengthen nonprofit organizations in building and sustaining healthy communities.
State of Connecticut Office of Policy and Management: The Nonprofit Liaison to the Governor interacts and communicates directly with nonprofit providers. It also advises the governor regarding policy reform and other measures beneficial to Connecticut nonprofits.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
