Starting Your Non-profit
There are a few things you might want to consider when you start your non-profit in Maine, particularly if you elect to form a 501(c)(3) organization.
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
There are different types of nonprofits in Maine. A 501(c)(3) nonprofit is exempt from federal taxation under the Internal Revenue Code. These are usually organizations that operate for charitable, religious, scientific and similar reasons. They may include both public charities and private foundations.
There are also other types of Maine nonprofits that may not qualify for tax exemption. Social welfare organizations, business leagues, and social and recreational clubs may also qualify for nonprofit status in Maine.
Considerations for Starting a Non-profit
Advantages:
- Maine not for profits are exempt from Maine income tax.
- Nonprofit corporations provide their shareholders, directors and officers with protection from liability.
- Some Maine nonprofits have advantages in fundraising, especially 501(c)(3) nonprofits.
- A nonprofit 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 nonprofits are good for managing large numbers of members, they're not an appropriate choice if you want to maintain personal control of your organization.
- Nonprofits require more time and money to create and maintain than sole proprietorships or partnerships.
- Grants from some federal and state government organizations may require nonprofit status.
Requirements and Mandatory Forms for Creating a Non-profit
- You must submit Articles of Incorporation (Form MNPCA-6) with the Corporate Examining Section of the Maine Secretary of State.
- If your corporation is a 501(c)(3) nonprofit, submit Form 1023, Application for Recognition of Exemption to the Internal Revenue Service. Exemption from Maine state income tax is automatic for nonprofits that have obtained 501(c)(3) from the IRS.
- 501(c)(3) nonprofits may also apply for exemption from Maine sales and use taxes by submitting a copy of the IRS 501(c)(3) determination letter, a statement of the purposes of the organization, and a sales and use tax exemption form to the Maine Revenue Services.
- File a charitable organization form and a copy of the IRS 501(c)(3) determination letter with the Maine Department of Professional and Financial Regulation.
How to Retain Your Non-profit Status
After forming your not for profit organization, you must meet specific guidelines to retain your nonprofit status.
- Nonprofit corporations must file an annual report (Form MNPCA 13) with the Maine Division of Corporations five months after the end of their fiscal year.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings, at its registered office.
- Nonprofits must file a charitable organization registration form with the Maine Department of Professional and Financial Regulation on Nov. 30 each year.
What it Costs to Form a Maine Non-profit
- The filing fee for Articles of Incorporation in Maine is $20.
- The filing fee for the sales and use tax exemption Form is $25.
- There is a $50 fee for the charitable organization registration form.
- Maine charges a $20 fee for filing annual reports.
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 are used.
Nonprofits operate for public purposes. and with public support. 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 Maine nonprofits. It's important for nonprofits to keep money received from grants separate and apart from the nonprofit's general fund. A good reputation in administering grant monies helps nonprofits obtain more funding from these sources.
Maine & National Nonprofit Resources
Maine Association of Nonprofits: MANP is an association committed to strengthening and advancing Maine's nonprofit sector. Their website offers resources, professional skill development programs and affordable healthcare and benefits plans.
Maine Community Foundation: This is a Maine-based foundation that provide grants to support organizations and individuals in numerous geographic and interest areas.
Maine Secretary of State: The Maine Secretary of State offers regulations, requirements and further information on beginning and maintaining nonprofit corporations in Maine.
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.
