Starting Your Nonprofit
When you're starting a non-profit in Wisconsin, there are a number of factors to consider, particularly 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 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 meeting 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.
- Wisconsin non-profits are usually exempt from federal tax on any income that's related to the organization's exempt purposes.
- Wisconsin non-profits are exempt from Wisconsin corporate franchise and income taxes.
- Your non-profit can apply for a Wisconsin sales tax exemption.
- Your non-profit may qualify to receive public and private grant money.
- Because you and your shareholders don't own your non-profit, 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 Nonprofit
- Articles of Incorporation, filed with the Wisconsin Department of Financial Institutions. 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
- Form S-103: Certificate of Exempt Status for exemption from Wisconsin sales tax
- Form 296, filed with the Department of Regulation and Licensing to solicit contributions or have them solicited on your non-profit's behalf. This form is only required if contributions exceed $5,000. Form 1943 is required when contributions do not exceed $5,000. Forms 308 and 1952 are required if contributions exceed $100,000.
- IRS Form 990: Annual Information Return
How to Retain Your Nonprofit Status
After forming your Wisconsin 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 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 your organization's exempt status.
- Maintain detailed records of corporate meetings.
- Make sure that when and if your non-profit dissolves, its assets are distributed to another tax-exempt group.
- Don't make loans to any of your directors or officers.
- Don't 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 Wisconsin Nonprofit
- Wisconsin's Department of Financial Institutions charges a $35 filing fee for non-profit Articles of Incorporation.
- The fee for an application to reserve a name fee $10.
- The IRS charges a $400 application fee to organizations that expect to earn less than $10,000 in total income over a four-year period. This fee increases to $850 if you expect to earn gross receipts exceeding $10,000 annually over a four-year period.
Applying for Grants and Loans
Grants can be used for general purposes, or they can help your organization meet its operating expenses. If a grant is awarded for a specific project, you should take steps to restrict the funds to that project.
Wisconsin & National Nonprofit Resources
Wisconsin Congressman Ron Kind has a website that offers links for project funding from federal sources. It also provides instructions on how to write grant proposals.
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.