Starting Your Non-profit
When you start a non-profit in New Mexico, there are a number of factors to consider, especially if you're creating 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 must still comply with certain requirements if you want to protect yourself and ensure that you're meeting your organization's goals. When you create a mission statement, you can explain your organization's purpose. Consider what problem or issue your organization wants to address, then focus your statement on creating values and methods that can guide your non-profit toward meeting its goals.
Considerations for Starting a Non-profit
- Incorporation protects your personal assets from your nonprofit's lawsuits and creditor claims. It also protects your trustees, officers and volunteers.
- New Mexico nonprofits are usually exempt from federal tax on any income that's related to the organization's 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 isn't 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
- Articles of Incorporation, filed with the New Mexico Public Regulation Commission, Corporations Bureau
- 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 ACD-31015: Registration to claim exemption from the state gross receipts tax when you're purchasing services or tangibles
- Form CRS-1: Application for Nontaxable Transaction Certificates
- IRS Form 990: Annual Information Return
How to Retain Your Non-profit Status
After you form your New Mexico not for profit organization, be sure to follow specific guidelines to retain your non-profit status.
- Keep detailed records of all sources of income.
- File annual reports.
- Keep unrelated activities separate from your nonprofit and pay separate taxes on income your organization receives from these activities. They could jeopardize your nonprofit status if they make up a substantial portion of your business.
- Ensure that the time and resources spent on your nonprofit are related to your organization's exempt status.
- Maintain detailed records of corporate meetings.
- Make sure that your nonprofit'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.
- File a Return of Organization Exempt from Income Tax form with the IRS each year if it's required based on your annual gross receipts,.
What it Costs to Form a New Mexico Non-profit
- New Mexico's Division of Revenue, Corporate Filing Unit charges $25 to file nonprofit Articles of Incorporation.
- A name reservation fee is $10.
- The state charges an initial report fee of $15.
- The IRS charges an application fee of $400 to organizations that expect to earn less than $10,000 in total income over a four-year period . The fee is $850 for nonprofits whose gross receipts are expected to exceed $10,000 annually over four-year period.
Applying for Grants and Loans
Grants may be for a general purpose, or they may help meet the operating expenses of your organization. If a grant is awarded for a specific project, you should take steps to restrict the funds to that project.
New Mexico & National Non-profit Resources
New Mexico Community Foundation: The NMCF is a grant program that supports a variety of nonprofit organizations by making funds available in a number of programs. It also provides management services.
The Grant Plant: This is an organization that works with many types of New Mexico nonprofits to develop resources in such areas as economic development, education, health, civic engagement and youth programs.
United Way of Central New Mexico: The United Way offers an online database for grant seekers with information about funding opportunities and finding applicable grant making organizations.
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.