Starting Your Non-profit
When you're starting a non-profit in New Jersey, there are a number of factors to consider, especially if you want to form a 501(c)(3) organization.
Creating a Mission Statement
You're creating a non-profit because you want to give back to your community, but you still have to comply with certain requirements to protect yourself and to ensure that you're meeting your organization's goals. When you create a mission statement, you can explain your organization's purpose. Start with the problem or issue your organization wants to address, then focus on the values and efforts that will guide your non-profit to these goals.
Considerations for Starting a Non-profit
- Incorporation protects your personal assets from your organization's lawsuits and creditor claims. It also protects your trustees, officers and volunteers.
- New Jersey nonprofits are usually exempt from federal tax on any income that's related to their exempt purposes.
- You can obtain an exemption from collecting sales and use taxes if your organization is formed under IRS Section 501(c)(3).
- 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 non-profit.
- Your non-profit's finances are open to public inspection.
Requirements and Mandatory Forms for Creating a Non-profit
- Certificate of Incorporation, filed with the New Jersey Division of Revenue, Corporate Filing Unit
- 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 REG-1E to obtain Form ST-5, Exempt Organization Certificate from collecting sales and use taxes
- Form CRI-200 or CRI-300R, to be filed with New Jersey Division of Consumer Affairs, Charities Registration and Investigation Section
- IRS Form 990: Annual Information Return
How to Retain Your Non-profit Status
After you form your New Jersey not for profit organization, you must follow specific guidelines to retain your nonprofit status.
- Keep detailed records of all sources of income.
- File annual reports.
- Keep unrelated activities separate from your nonprofit, and pay separate taxes on any income they generate. Income from these activities could jeopardize your nonprofit status if it makes up a substantial portion of your business.
- Ensure that the time and resources spent on your non-profit are related to your organization's exempt status.
- Maintain detailed records of corporate meetings.
- Make sure that your non-profit's assets are distributed to another tax-exempt group when and if it dissolves.
- Do not make loans to any of your directors or officers.
- Do not issue shares of stock or pay dividends or other shares of income to members, directors or officers.
- If it's required based on your annual gross receipts, file a Return of Organization Exempt from Income Tax form with the IRS each year.
What it Costs to Form a New Jersey Non-profit
- New Jersey's Division of Revenue Corporate Filing Unit charges a $75 filing fee for a nonprofit Certificate of Incorporation.
- A name reservation fee is $50.
- The IRS user fee for Form 8718 is between $150 and $500.
- The IRS charges an application fee of $400 for organizations that expect to earn less than $10,000 in total income over a four-year period. The fee is $850 if you expect your nonprofit to earn gross receipts that exceed $10,000 annually over a four-year period.
Applying for Grants and Loans
Grants may be for a general purpose, or they may be awarded to help you meet your operating expenses. If a grant is given for a specific project, you should take steps to restrict the funds to that project.
New Jersey & National Non-profit Resources
New Jersey State Library: This site offers information about applying for grants on behalf of your nonprofit.
State of New Jersey: The Official Website for the State of New Jersey offers a list of state agencies and departments that provide financial assistance for a variety of activities related to education, the environment, community affairs, agriculture, health and human services, and business financing and incentives.
The Center for Non-Profits: Get information on funding opportunities for New Jersey nonprofits at The Center for Non-Profits.
USA.gov: 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.