Starting Your Nonprofit
There are a few things you may want to consider when starting your non-profit in Pennsylvania, particularly if you want 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
Pennsylvania recognizes different different types of nonprofits. 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.
Social welfare organizations, business leagues, social and recreational clubs may also qualify for nonprofit status in Pennsylvania. Some types of Pennsylvania nonprofits do not qualify for tax exemption.
Considerations for Starting a Nonprofit
- Pennsylvania not for profits are exempt from Pennsylvania income tax.
- Non-profit corporations provide their shareholders, directors and officers with protection from liability
- Some Pennsylvania 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 large numbers of members, they're not a good choice if you want to retain personal control over your organization.
- Non-profits require more time and money to create and maintain than sole proprietorships or partnerships.
- Grants from some federal and state government organizations may require non-profit status.
Requirements and Mandatory Forms for Creating a Nonprofit
- You must submit Articles of Incorporation and a docketing statement to the Corporation Bureau of the Pennsylvania Department of State.
- Your nonprofit must publish either the intent to file, or the actual filing, of its Articles of Incorporation in two newspapers. Proof of publication should be kept with your nonprofit's minutes.
- If your corporation is a 501(c)(3) nonprofit, submit Form 1023, Application for Recognition of Exemption, to the Internal Revenue Service.
- To obtain exemption from Pennsylvania corporation and sales taxes, file copies of your IRS exemption letter, your Articles of Incorporation, bylaws, current financial statement, and Form REV-72 with the Pennsylvania Department of Revenue, Bureau of Business Trust Fund Taxes.
- Nonprofit organizations must also register with the Pennsylvania Bureau of Charitable Organizations within 30 days of receiving $25,000 in contributions. Include Form BCO-10 with your registration, as well as copies of your IRS exemption letter, Articles of Incorporation, bylaws, and IRS Form 990.
How to Retain Your Nonprofit Status
After forming your not for profit organization, you must meet certain guidelines to retain your nonprofit status.
- Nonprofit corporations must file annual statements with the Corporation Bureau of the Pennsylvania Department of State on or before April 30 each year.
- Nonprofits must file a Decennial Report of Continued Existence with the Department of State Corporations Bureau every 10 years.
- A nonprofit corporation should maintain complete books and records of accounts, as well as minutes of corporate meetings, at its registered office.
What it Costs to Form a Pennsylvania Nonprofit
- Pennsylvania charges a $125 filing fee for non-profit Articles of Incorporation.
- The filing fee for the Decennial Report of Continued Existence is $70.
- The filing fee for Charitable Organization Form BCO-10 is between $15 and $250, depending on the amount of contributions your non-profit has solicited.
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 will be used.
Nonprofits operate for public purposes with public support, so information regarding your 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 Pennsylvania 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.
Pennsylvania and National Nonprofit Resources
Pennsylvania Association of Nonprofit Organizations: PANO provides training, networking, information, discounts and advocacy for Pennsylvania nonprofits.
National Council of Nonprofits: This national organization provides resources for starting and maintaining a nonprofit organization.
Pennsylvania Department of State: This site offers regulations and guidelines for starting and maintaining nonprofits in Pennsylvania.
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.