Starting Your Non-profit
When you start a non-profit in Hawaii, there are a number of factors to consider, depending on whether you form a 501(c)(3) or other type of organization.
Creating a Mission Statement
Although you're creating a non-profit because you want to give back to your community, you still have to meet certain requirements to protect yourself and to ensure that your organization achieves its 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 addressing the efforts and values that will guide your non-profit toward reaching its goals.
Considerations for Starting a Non-profit
- Incorporation protects your personal assets from lawsuits and creditor claims. It also protects your trustees, officers and volunteers.
- Hawaii nonprofits are usually exempt from federal tax on any income that's related to your organization's exempt purposes.
- Your nonprofit may automatically receive Hawaii's state tax exemption.
- Some sales and purchases are exempt from the general excise tax (GET).
- Your nonprofit may qualify to receive public and private grant money.
- Because your nonprofit 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 nonprofit.
- Your nonprofit's finances are subject to public inspection.
- Fundraising activities are outside the organization's stated exempt purpose and are subject to the GET.
Requirements and Mandatory Forms for Creating a Non-profit
- Articles of Incorporation. Your Articles must be filed with the Hawaii Department of Commerce and Consumer Affairs' Business Registration Division.
- Name reservation request form
- Incorporator's statement
- IRS Form 1023: Application for Recognition of Exemption
- Form SS-4: Application for employer identification number
- IRS determination letter
- Form G-6: Application for Exemption from the Payment of General Excise Taxes (GET)
- IRS Form 990
- Registration with the Hawaii State Attorney General's Charity Resource Office, after you receive donations.
How to Retain Your Non-profit Status
After forming your Hawaii not for profit organization, you'll have to follow specific guidelines to retain your status.
- Keep detailed records of all sources of income.
- File annual reports.
- Keep unrelated activities separate from your nonprofit activities, and pay separate taxes on them.
- Ensure that the time and resources spent on your nonprofit are related to your organization's exempt status.
- Maintain detailed records of corporate meetings.
- When your nonprofit dissolves, make sure its assets are distributed to another tax-exempt group.
- Do not make loans to your directors or officers.
- Do not issue shares of stock or pay out dividends or other shares of income to members, directors or officers.
What it Costs to Form a Hawaii Non-profit
- Hawaii's Attorney General's office requires a $25 fee for filing nonprofit Articles of Incorporation.
- The name reservations fee is $10.
- The G-6 registration fee is $20.
- The IRS charges a $400 application fee to organizations that anticipate earning less than $10,000 in total income over a four-year period. If you expect your nonprofit to generate more income than that, the fee is $850.
Applying for Grants and Loans
Hawaii's Department of the Attorney General: This site offers more information about applying for grants on behalf of your nonprofit.
Hawaii and National Non-profit Resources
Hawaii Alliance of Nonprofit Organizations: This site is a key link to resources for workshops and information on handling finances and achieving your organization's goals.
Hawaii Department of Research & Development: This site offers funding and grant resources for energy, arts, culture and economic development.
USA.gov. for Non-profits: This site offers information and services about grants, loans, management, tax information and funding directories for all states.
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.