Starting Your Non-Profit
There are several factors to consider when you're forming a non-profit in North Carolina, particularly if you want to establish a (501)(c)(3) organization.
Creating a Mission Statement
It's helpful to create a mission statement before you begin the work of forming your non-profit. Start with a broad view, then pare it down to details. The process may involve some repetition of thought, but no important details will be overlooked.
501(c)(3) and Other Types of Non-Profits
North Carolina recognizes several types of non-profits, including charitable, religious, educational, scientific, healthcare and veterans organizations. None of these are automatically tax-exempt. Non-profits must file Form 1023, Application for Recognition of Exemption, with the IRS to request tax-exempt status.
Considerations for Starting a Non-profit
Advantages:
- Your non-profit's assets and property belong to the corporation. In the event of creditors' claims or lawsuits, only these assets are vulnerable. Claims and lawsuits can't attach to the personal property of trustees, officers or managers.
- Non-profits may qualify for several forms of tax-exemption.
Disadvantages:
- Planning a non-profit involves significant time and effort.
- If control, independence and autonomy are important to you, nonprofit status might not be right for you.
Requirements and Mandatory Forms for Creating a Non-profit
- File an application to reserve a business entity name with the Department of Secretary of State, if applicable.
- File Nonprofit Corporation's Designation of Principal Office Address with the Department of Secretary of State.
- File Articles of Incorporation with the Department of Secretary of State.
- If yours is an out-of-state corporation, you must file an application for a Certificate of Authority, along with a Certificate of Existence authenticated by the Secretary of State in the state where you initially incorporated.
- If you plan to solicit contributions, you must apply for a license annually with the Department of the Secretary of State, Solicitation Licensing Section.
How to Retain Your Non-profit Status
After you achieve not for profit status, you must focus on keeping it.
- Designate a principal office address with the Secretary of State.
- File a charity registration with the Department of Revenue if you plan on soliciting contributions from the public.
- Prepare bylaws. Initial bylaws must be adopted by your incorporators or your board of directors.
Tax-Exemption and Other Benefits
After satisfying mandatory requirements for obtaining non-profit status, a few hurdles remain for acquiring and retaining tax exemption.
Federal Taxes:
- To obtain status as a 501(c)(3) corporation with exemption from federal income taxes, non-profits must file Form 1023, Application for Recognition of Exemption with the IRS.
- To retain tax exemption, file Form 990-N, Form 990-EZ, or Form 990 with the IRS, based upon your annual gross income receipts.
State Taxes:
- Nonprofits must submit a completed questionnaire, a copy of their Articles of Incorporation and their bylaws to North Carolina Department of Revenue to obtain tax exemption from state franchise and income taxes.
What it Costs to Form a North Carolina Non-profit
Non-profits in the Tar Heel State must pay a $60 filing fee for their Articles of Incorporation, and a $5 filing fee for a Designation of Principal Office Address. There are additional fees to reserve a business name, to file an application for Certificate of Authority, and to obtain a license to solicit funds.
The IRS charges either $400 or $850 for applications for tax-exempt status, depending on your nonprofit's gross annual receipts.
North Carolina & National Nonprofit Resources
NC Center for Nonprofits: Here you can find training information, forums, job boards, publications, pro bono programs, information on how to form a 501(c)(3) entity, and a helpline.
WNC Nonprofit Pathways: Pathways supports Western North Carolina's nonprofits with fund development, financial management, board and governance, evaluations, legal compliance, and human resource management information.
North Carolina Network of Grantmakers: The Grantmakers' website offers social media tools, reports and blogs to promote information sharing between nonprofits and funders.
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.
