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 do and by explaining its purpose. Answer these six important questions: who, what, where, when, why and how? Lay out your company's objectives, activities, and resources, and explain how and where it will obtain funding.
501(c)(3) and Other Types of Non-profits
Utah recognizes different types of nonprofits in Utah. 501(c)(3) nonprofits are 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.
Social welfare organizations, business leagues, and social and recreational clubs may also qualify for nonprofit status in Utah. There are also other types of Utah nonprofits that may not qualify for tax exemption.
Considerations for Starting a Nonprofit
Advantages:
- Utah not for profits are exempt from Utah income tax.
- Non-profit corporations may provide their shareholders, directors and officers with protection from liability.
- Some Utah 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 non-profits are good for managing large numbers of members, they're not a good choice if you want to retain personal 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 Nonprofit
- You must submit Articles of Incorporation to the Utah Department of Commerce.
- Your nonprofit must publish either the intent to file, or the actual filing, of its Articles of Incorporation in two newspapers. Proof of publication should be kept with the nonprofit's minutes.
- If your corporation is a 501(c)(3) nonprofit, submit Form 1023, Application for Recognition of Exemption, to the Internal Revenue Services. Nonprofits exempt from federal tax are automatically exempt from Utah Franchise and Income Tax.
- 501(c)(3) nonprofits may apply for exemption from Utah sales tax by submitting Form TC-160, along with a copy of the IRS exemption letter, to the Utah State Tax Commission, Religious and Charitable Section.
- Nonprofit organizations that will solicit donations must also register with the Utah Department of Commerce, Division of Consumer Protection. Submit the Charitable Organization Permit Application Form, along with copies of the IRS exemption letter, your Articles of Incorporation, bylaws, copies of contracts with any fundraisers, and IRS Form 990 or annual financial report.
How to Retain Your Nonprofit Status
After forming your not for profit organization, you must follow certain guidelines to retain your nonprofit status.
- Nonprofit corporations must file annual reports with the Utah Department of Commerce, Division of Corporations.
- File a Charitable Organization Permit Application Form Renewal 12 months after the original filing.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings, at its registered office.
What it Costs to Form a Utah Nonprofit
- Utah charges a $22 filing fee for non-profit Articles of Incorporation. A $30 non-refundable processing fee must also be submitted with the Articles.
- The filing fee for annual reports is $7.
- The Charitable Organization Permit Application Form Renewal fee is $100.
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 intentions 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 your nonprofit's mission activities and finances should be made available to the public.
Applying for Grants & Loans
Grants and loans from federal, state and private sources are a major source of funding for Utah non-profits. A not for profit corporation is responsible for complying with grant requirements and keeping appropriate records. It's important for non-profits to keep money received from grants separate and apart from the non-profit's general fund. A good reputation in administering grant monies helps non-profits obtain more funding from these sources.
Utah & National Nonprofit Resources
Utah Nonprofits Association: UNA provides training, networking, information, discounts and advocacy for Utah nonprofits.
National Council of Nonprofits: This national organization provides resources for starting and maintaining a nonprofit organization.
Utah Division of Corporations and Commercial Code: This website offers regulations and guidelines for starting and maintaining nonprofits in Utah.
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.
