Starting Your Non-Profit
Starting a non-profit is an exciting time, but it's important to remember your mission. Arkansas allows two or more people to create an informal nonprofit entity by simply agreeing among themselves to act for a nonprofit purpose. Although this is a legal entity, you'll have more credibility if you incorporate as a nonprofit. Incorporating may offer you better legal protection as well. You can form a non-profit for charitable, educational, social, literary, scientific and other reasons. However, your company should not benefit any particular person when meeting these goals. This last point is very important if you intend to apply for tax-exempt status under section 501(c)(3) of the Internal Revenue Code, as it's a requirement of the Code.
Creating a Mission Statement
Preparing a mission statement will help you stay on point when you're creating your non-profit. A mission statement clarifies your goals and explains how you plan to meet them. As a guideline, describe what, where, when and how your non-profit's purpose will be met, as well as who is going help your non-profit meet it. It may take a few tries to narrow your ambitions down into a workable plan.
Requirements and Mandatory Forms for Creating a Nonprofit
When you incorporate as a nonprofit in Arkansas, you must file Articles of Incorporation with the state. At a minimum, this document should include the following
- Your nonprofit's name.
- How long your nonprofit will last. This can be "perpetual."
- Whether your nonprofit is a public benefit, mutual benefit or religious organization.
- The address of your principal place of business.
- The name and address of a registered agent.
- The names and addresses of your initial board. You should have at least three directors.
- The names and addresses of all incorporators.
- A statement indicating whether your nonprofit will have members.
- How assets will be distributed to other nonprofits, if yours stops operating.
How to Retain Your Nonprofit Status
Arkansas has guidelines for retaining nonprofit status, and the federal government also has rules for maintaining tax-exempt status.
Your nonprofit must make an annual disclosure to the Secretary of State by Aug. 1 of each year. It should also file a copy of its tax information returns with the Attorney General. This form is due by May 15 if you operate on a calendar year, or within six months after the end of your fiscal year.
Your not for profit corporation must follow many of the same procedures and keep many of the same records as a for-profit corporation. Accurate records protect both your liability and tax-exempt status. All records should be easily accessible for review.
- Keep corporate records books. Include your Articles of Incorporation, bylaws, policies, meeting minutes and tax exempt filing paperwork. If you have voting members, include their names and addresses.
- Record all financial transactions appropriately. Keep copies of all receipts for reimbursement.
There are also some special rules that apply to non-profits:
- Do not make loans to any of your directors or officers.
- Do not issue shares of stock or pay out dividends or other shares of income to members, directors or officers.
- If it's required based on your annual gross receipts, file a Return of Organization Exempt from Income Tax form with the IRS each year.
- Income from commercial activities not related to your charitable purpose is taxable. These activities could jeopardize your non-profit status if they make up a substantial portion of your business.
What it Costs to Form an Arkansas Non-Profit
When you incorporate as a non-profit in Arkansas, you must pay a state filing fee. This fee is currently $50.
If you apply for 501(c)(3) status, the IRS charges $400 for organizations with revenues of $10,000 or less and $800 for all others.
Arkansas & National Nonprofit Resources
Arkansas Secretary of State: The Secretary of State offers general information about nonprofits. You can also file your Articles of Incorporation online.
Legal Guide for Arkansas Nonprofit and Volunteer Organizations (PDF): This booklet explains the basics of both Arkansas and federal regulations for nonprofit corporations.
Arkansas Small Business and Technology Development Center: The Arkansas Small Business and Technology Development Center offers helpful information for finding grants.
USA.gov for Nonprofits: USA.gov for Nonprofits has a variety of services for 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.