Starting Your Non-profit
There are a few things you may want to consider when starting your non-profit in Massachusetts, depending on whether you choose a 501(c)(3) or other type of 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 Massachusetts. 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 other similar reasons. They may include both public charities and private foundations.
There are also other types of Massachusetts nonprofits that may not qualify for tax exemption. Social welfare organizations, labor unions, farm bureaus, business leagues, social clubs and recreational clubs may also qualify for nonprofit status in Massachusetts.
Considerations for Starting a Non-profit
When you're creating your Massachusetts nonprofit, consider the potential advantages and disadvantages.
- Massachusetts not for profits are exempt from Massachusetts corporate income tax.
- Non-profit corporations may provide their shareholders, directors and officers with protection from liability.
- Some Massachusetts nonprofits have advantages in fund raising, especially 501(c)(3) non-profits.
- A non-profit 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.
- Although non-profits are good for managing a large number of members, they're not a good choice if you want to retain control of your organization.
- Non-profits require more time and money to create and maintain than a sole proprietorship or partnership.
- Grants from some federal and state government organizations may require non-profit status.
Requirements and Mandatory Forms for Creating a Non-profit
In order to start and run a nonprofit in Massachusetts, you must file Articles of Incorporation with the Massachusetts Corporations Division.
How to Retain Your Non-profit Status
After forming your not for profit organization, you must follow certain specific guidelines to retain your nonprofit status.
- An annual report must be filed with the Massachusetts Secretary of State by Nov. 1 of each year. Religious organizations, most nonprofit schools and colleges, charitable hospitals, and some library organizations are exempt from this requirement.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings. These should be kept at your registered office.
- 501(c)(3 nonprofits also may be exempt from sales tax in Massachusetts. They should file an Application for State Sales Tax Exemption (Form ST-2) with the Massachusetts Department of Revenue.
What it Costs to Form a Massachusetts Non-profit
The current fee for incorporating a non-profit in Massachusetts is $35.
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 intent of their donors in areas such as anonymity and the use of gifts. Written agreements can help avoid disputes about how gifts will be used.
Nonprofits operate for public purposes with public support. Information regarding the 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 Massachusetts non-profits. A not for profit corporation is responsible for complying with grant requirements and keeping appropriate records. It's important for non-profits to keep money received from grants separate and apart from the non-profit's general fund. A good reputation in administering grant monies helps non-profits obtain more funding from these sources.
Massachusetts & National Nonprofit Resources
Massachusetts Nonprofit Network: This is a statewide membership organization that strengthens the Massachusetts nonprofit sector through advocacy, public awareness, and various resources.
Massachusetts Corporations Division: The Massachusetts Corporation Division lists requirements, regulations and other information for starting and maintaining a nonprofit corporation in the state.
MassNonProfit.org: This site offers news and information for the nonprofit sector in Massachusetts.
Associated Grant Makers: This is a regional organization of grant makers in Massachusetts and surrounding areas.
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.