Starting a Non-profit
There are several points to consider when you set up a non-profit organization, particularly if you choose to create a 501(c)(3) non-profit.
Creating a Mission Statement
When you create your mission statement, it's helpful to start with a broad view, then whittle it down to specifics. The process may involve a bit of repetition, but it will ensure that you don't omit any important considerations.
501(c)(3) and Other Types of Non-profits
Louisiana offers incorporation to multiple nonprofits, including charitable organizations, religious organizations, educational organizations, and organizations associated with health and quasi-public concerns. 501(c)(3) corporations are tax-exempt. To achieve this status, you must submit Form 1023, an Application for Recognition of Exemption, to the IRS.
Considerations for Creating a Non-profit
- Assets or property that might be at risk in a lawsuit or to creditor claims belong solely to the corporation. They attach only to corporate assets and property, not the personal property of trustees, officers or managers.
- A significant amount of time and effort is required to plan a nonprofit
- If control, autonomy, and independence in corporate governance are important to you, nonprofit status may not be your best option.
Requirements and Mandatory Forms for Creating a Non-profit
Forming a non-profit involves several steps to ensure that you meet both Louisiana's requirements and those of the IRS.
- You must draft bylaws that establish the entity's structure and its governing board.
- You must incorporate as a nonprofit with the Louisiana Secretary of State.
- You must obtain tax-exempt status with the IRS and with Louisiana for multiple taxes, including income taxes, franchise taxes and sales taxes.
- You must complete and file additional forms for state compliance purposes, including annual reporting requirements, IRS requirements, and best business practices.
- You must file Articles of Incorporation.
- You must file a Certificate of Incorporation.
How to Retain Your Non-profit Status
Maintaining your nonprofit status should be one of your primary concerns. Here are a few pointers.
- Articles of Incorporation must be filed with the Commercial Division of the Secretary of State to ensure your nonprofit status.
- A Certificate of Incorporation must be filed within 30 days of filing your Articles of Incorporation.
- A certified copy of your Articles of Incorporation, or an original signed copy, must be filed along with your Certificate of Incorporation at the office of the recorder of mortgages in your nonprofit's parish.
Tax-Exemption and Other Benefits
After you complete the mandatory steps for creating your nonprofit, there are a few other tasks you should undertake for tax-exempt status.
- 501(c)(3) status refers to exemption from federal income taxes. To obtain state income tax exemption as well, submit a copy of the 501(c)(3) determination letter you'll receive from the IRS to the Louisiana Department of Revenue.
- Under state law, nonprofits are exempt from franchise tax assessment.
- You must file Form R-1048, the Application for Exemption from Collection of Louisiana Sales Taxes, with the Louisiana Department of Revenue to be exempt from sales tax on sales of goods.
- Nonprofits in Louisiana are not exempt from sales tax on purchases.
What It Costs to Form a Non-profit in Louisiana
Louisiana charges a $60 filing fee for Articles of Incorporation. You can expedite your filing so it's completed with 24 hours for $90.
A Louisiana nonprofit must file Form 1023, the Application for Recognition of Exemption, with the IRS. The filing fee is $850 unless your revenues are less than $10,000 annually. In this case, the fee is only $400.
Louisiana and National Non-profit Resources
Louisiana Association of Nonprofit Organizations (LANO): This network supports the state's nonprofits. In exchange for a sliding scale annual membership, you can tap into online resources for fundraising, grants, legislation and advocacy.
Louisiana State University Shreveport: The Institute for Human Services and Public Policy at LSU offers services to businesses and nonprofits, especially those applying for federal or private foundation grants that require program evaluations and research.
Greater New Orleans Foundation: This website offers workshops, dialogues and instruction for those seeking to improve nonprofit effectiveness.
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.