Starting Your Non-profit
When you're starting a non-profit in Indiana, you'll have to decide whether you want to incorporate and if so, whether your nonprofit corporation will have members. Many non-profits are corporations because this business form offers the best liability protection. Considerations for forming your non-profit may depend on if you want to establish a 501(c)(3) or other type of organization.
Creating a Mission Statement
Communities always seem to have multiple unmet needs. A mission statement can help your non-profit focus on the one that's most important to you. Decide how you intend to meet your goal. A narrow goal with very specific goals regarding where to operate and what services to offer is most effective. It may take several tries to refine your mission statement into a workable plan.
501(c)(3) and Other Types of Non-profits
When you form a nonprofit in Indiana, it's not automatically recognized by the federal government. You must apply for this recognition and for tax exempt status. The section of the Federal Code that covers most nonprofits is 501(c)(3), which is why nonprofits are also often called 501(c)(3) organizations. Not all non-profits are recognized under this section, however. Section 501(c)(3) covers organizations that provide charitable, scientific, educational, religious and similar services. Other nonprofits may not qualify for tax exemption.
Considerations for Starting a Non-profit
- A nonprofit that incorporates becomes its own legal entity. It's separate from its founders, directors and others. This means the business, not any individual, is liable for its debts or any other legal issues that may arise.
- If your nonprofit meets the qualifications for tax-exempt status, it will be exempt from many federal and state taxes.
- Certain non-profit purposes qualify for property tax exemptions.
- You have much less control over a nonprofit than you would over other business forms. Nobody 'owns" a non-profit. The board controls the company and employs the CEO.
- It takes a lot of time and money to set up a non-profit correctly, including securing tax-exempt status. After you're set up, it takes even more effort to maintain your nonprofit status. You'll have to be very careful about the type of activities your nonprofit engages in.
Requirements and Mandatory Forms for Creating a Non-profit
You must file Articles of Incorporation to start a nonprofit corporation in Indiana. Your Articles must meet the following minimum requirements:
- Your nonprofit's name.
- Whether your organization will be for public benefit, mutual benefit or religious benefit.
- The name and address of your registered agent.
- The names and addresses of your incorporators.
- Whether your nonprofit will have members.
- How your nonprofit's assets will be distributed if it stops operating.
The last requirement is very important. Without this provision, you cannot gain tax exempt status.
How to Retain Your Non-profit Status
You'll need to follow certain rules set by both the state of Indiana and the federal government to maintain your not for profit status.
- File an annual Business Entity Report, along with the appropriate fee. This report is due during your anniversary month every year.
- Keep accurate corporate records books. All files, including your Articles, bylaws, meeting minutes and tax exempt filings, should be easily accessible for review.
- Keep careful financial records, including donations, income from related activities and income from unrelated activities.
- Pay income taxes on any income from commercial activities not related to your charitable purpose. Also, make sure these activities do not make up a substantial portion of your business.
- Do not issue stock or pay dividends to directors or other individuals.
What It Costs to Form an Indiana Non-profit
Indiana charges a filing fee, currently $30, to file your Articles of Incorporation. The IRS charges a filing fee for Form 1023, Application for Recognition of Exemption. This fee is currently $400 for organizations with annual gross receipts of $10,000 or less, and $850 for organizations with annual gross receipts exceeding $10,000.
Indiana & National Non-profit Resources
Business Owner's Guide to State Government (PDF): This site has a guide to state and federal requirements for starting and running a business. It includes information for nonprofits.
USA.gov for Nonprofits: USA.gov for Nonprofits offers links to 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.