The First State is a diamond in the rough that offers a small but sparkling setting for forming a Delaware non-profit corporation. A non-profit provides personal asset protection, state and federal tax exemptions, and tax deductions for certain types of gifts. Read on to learn more about starting a non-profit in Delaware.

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Starting Your Non-profit

When you're starting a non-profit in Delaware, there are a number of factors to consider, especially if you're forming a 501(c)(3) organization.

Creating a Mission Statement

You're creating a non-profit because you want to give back to your community, but you must still meet certain requirements to protect yourself and to ensure that you're meeting your organization's goals. When you create a mission statement, you can explain your organization's purpose. Consider what problem or issue your organization wants to address, then focus your statement on the efforts and values that will guide your non-profit to meeting its goals.

Considerations for Starting a Non-profit

Advantages:


  • Incorporation protects your personal assets from your organization's lawsuits and creditor claims. It also protects your trustees, officers and volunteers.
  • Delaware non-profits are usually exempt from federal tax on any income that's related to your organization's exempt purposes.
  • Delaware does not collect sales taxes.
  • Your non-profit may qualify to receive public and private grant money.

Disadvantages:


  • Because your non-profit is not owned by you or your shareholders, you won't have individual control and autonomy over your organization.
  • More paperwork is involved, such as creating bylaws and recording and maintaining corporate minutes.
  • You'll need time and money to apply for the federal tax exemption, and you'll need an accountant or legal professional to help you operate your non-profit.
  • Your non-profit's finances are open to public inspection.

Requirements and Mandatory Forms for Creating a Non-profit

  • Articles of Incorporation, filed with the Delaware Department of State, Division of Corporations. Your Articles must include a required purposes clause and a dissolution of assets provision.
  • Name reservation request form
  • Incorporator's statement
  • Registered agent
  • Bylaws
  • IRS Form 1023: Application for Recognition of Exemption
  • Form SS-4: Application for employer identification number
  • IRS determination letter
  • Registration as a charitable organization with the Delaware Department of Justice Charitable Activities Section
  • IRS Form 990: Annual Information Return

How to Retain Your Non-profit Status

After forming your Delaware not for profit organization, be sure to follow specific guidelines to retain your nonprofit status.

  • Keep detailed records of all sources of income.
  • File annual reports.
  • Keep unrelated activities separate from your nonprofit and pay separate taxes on these activities. Unrelated activities could jeopardize your nonprofit status if they make up a substantial portion of your business.
  • Ensure that the time and resources spent on your nonprofit are related to your organization's exempt status.
  • Maintain detailed records of corporate meetings.
  • Make sure that your nonprofit's assets are distributed to another tax-exempt group when and if it dissolves.
  • Do not make loans to any of your directors or officers.
  • Do not issue shares of stock or pay dividends or other shares of income to members, directors or officers.
  • File a Return of Organization Exempt from Income Tax form with the IRS each year, if it's required based on your annual gross receipts.

What it Costs to Form a Delaware Non-profit

  • Delaware's Department of State, Division of Corporations charges an $89 filing fee, plus $9 for each additional page, for nonprofit Articles of Incorporation.
  • A name reservation fee is $75.
  • The annual report filing fee is $50
  • The IRS charges an application fee of $400 to organizations that expect to earn less than $10,000 in total income over a four-year period. This fee increases to $850 for organizations whose gross receipts exceed $10,000 annually over a four-year period.

Applying for Grants and Loans

Grants can be used for general purposes, or to help your organization meet its operating expenses. If a grant is awarded for a specific project, you should take steps to restrict the funds to that project.

Delaware & National Non-profit Resources

Fundsnet Services: This site offers a list of available community investment programs from banks and private funders.

Delaware Association of Nonprofit Agencies: This sit provides notices of workshops, conferences and information for making your organization work more effectively in achieving its goals. It also offers accounting firms, financial services, links to fundraising and for finding grants.

Delaware Grant Watch: This site helps research federal and local foundations for your nonprofit. Corporate and international grant resources can also be explored here.

USA.gov. USA.gov offers information and services about grants, loans, management, tax information and funding directories for all states.

 

Get started Start Your Non-Profit Answer a few questions. We'll take care of the rest.

Get started Start Your Non-Profit Answer a few questions. We'll take care of the rest.