Form a Nonprofit

by Bethany K. Laurence, J.D.

Follow these steps to form your own nonprofit 501(c)(3) corporation.

1. Choose a name.
The name of your nonprofit corporation cannot be the same as the name of another corporation on file with your state's corporations office (usually the Secretary of State's office). It must end with a corporate designator, such as “Corporation,” “Incorporated,” or “Limited,” or an abbreviation of any of those words.

Your state's corporations office can tell you how to find out whether your proposed name is available for your use. For a small fee, you can usually reserve the name for a short period of time until you file your articles of incorporation. For more information, contact your state’s corporations office.

2. File articles of incorporation.
You must file "articles of incorporation" with the state’s corporate filing office. In this document, you fill out some basic information such as your nonprofit's name and office address. Although preparing this document isn't difficult, you do need to include specific language to ensure that you'll receive tax-exempt status. Your state's nonprofit formation packet, if available, may include the required information. If not, or if you need help understanding the requirements, consult How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo), to make sure your articles comply with your state's nonprofit law.

3. Apply for your IRS tax exemption.
Submit a federal 501(c)(3) tax exemption application to the IRS (along with a copy of your filed articles with your application). To apply for your exemption, you must complete IRS Form 8718, User Fee for Exempt Organization Determination Letter Request, and IRS Package 1023, Application for Recognition of Exemption. If you need a bit of help deciphering the IRS-speak, download Nolo's plain-English eGuide, Nonprofit Corporations: Qualify for Federal Income Tax Exemption.

4. Apply for a state tax exemption.
This step does not apply to nonprofits in all states. In California, Montana, North Carolina, and Pennsylvania, you must complete a separate application to get a state tax exemption. In other states, as long as you file nonprofit articles of incorporation and obtain your federal 501(c)(3) tax-exempt status, your state tax exemption will be automatically granted. In still others, to get your state exemption you must send in a copy of the IRS determination letter that granted your federal exemption. Contact your state tax agency to find out what steps you must take.