Starting Your Nonprofit
When you're starting a non-profit in South Dakota, there are a number of factors to consider, especially if you're forming 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 meet 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. Consider what problem or issue your organization wants to address, then focus your statement on the efforts and values that will guide your non-profit to its goals.
Considerations for Starting a Nonprofit
- Incorporation protects your personal assets from your non-profit's lawsuits and creditor claims. It also protects your trustees, officers and volunteers.
- South Dakota non-profits are usually exempt from federal tax on any income that's related to the organization's exempt purposes.
- Your non-profit may qualify to receive public and private grant money.
- Because your non-profit 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.
- Only certain entities are exempt from having to pay sales or use tax on purchases.
- 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 Nonprofit
- Articles of Organization, filed with the South Dakota Secretary of State. Your Articles must include a required purposes clause and a dissolution of assets provision.
- Name reservation request form
- Incorporator's Statement
- Registered agent
- IRS Form 1023: Application for Recognition of Exemption
- Form SS-4: Application for employer identification number
- IRS determination letter
- IRS Form 990: Annual Information Return
How to Retain Your Nonprofit Status
After forming your South Dakota not for profit organization, you must follow certain guidelines to retain your non-profit status.
- Keep detailed records of all sources of income.
- File annual reports.
- Keep unrelated activities separate from your non-profit, and pay separate taxes on them. Unrelated activities could jeopardize your nonprofit status if they make up a substantial portion of your business.
- Ensure that the time and resources spent on your non-profit are related to the organization's exempt status.
- Maintain detailed records of corporate meetings.
- Make sure that if and when your non-profit dissolves, its assets are distributed to another tax-exempt group.
- Do not make loans to any of your directors or officers.
- Do not issue shares of stock or pay out 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 South Dakota Nonprofit
- South Dakota's Secretary of State charges a $30 filing fee for non-profit Articles of Organization.
- A name reservation fee is $25.
- The annual report fee is $10.
- The IRS charges a $400 application fee to organizations that expect to earn less than $10,000 over a four-year period. This fee increases to $850 if your non-profit's gross receipts exceed $10,000 annually over a four-year period.
Applying for Grants and Loans
Grants can be used for a general purpose, or they can help your non-profit meet its operating expenses. If a grant is awarded for a specific project, you should take steps to restrict the funds to that project.
South Dakota & National Nonprofit Resources
Fundsnet Services: This site offers a list of available South Dakota community investment programs from banks and private funders.
South Dakota Grant Watch has online grant opportunities from federal and state sources for a wide array of activities.
Kristi Noem, Congresswoman from South Dakota, maintains a website for anyone researching federal, private and corporate funding sources.
USA.gov. 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.