A nonprofit organization is, by law, an organization that does not distribute revenue to its owners. Any revenue retained by a nonprofit is used to propagate the purpose of the organization. In the United States, nonprofit organizations are known as 501(c) organizations, which is the section of the Internal Revenue Service code in which nonprofits fall. To begin a nonprofit organization, a charter must be established and filed to incorporate the organization into the state in which it was founded. A charter can also be called articles of incorporation.
Recruit a board of directors. A board of directors is necessary to incorporate in the state in which your nonprofit is founded; therefore, a board of directors is an important aspect in drawing up a charter. A board of directors has the legal duty to govern the organization, carrying out duties such as making policy decisions on how to develop and run the organization. A board of directors is important in developing a nonprofit’s mission and integral in developing a coherent charter in which all members of the board understand the mission and goals of the organization.
Draft a mission statement. The board of directors will be essential in agreeing to and suggesting the purpose, goals and strategic outline of the organization. The mission statement is often required in addition to the articles of incorporation.
Draft articles of incorporation. Articles of incorporation are the specific legal aspects of your organization and must be filed to incorporate in your state. Many nonprofits complete this process without paying any fees for legal advice, although, according to the Foundation Center, it might behoove an organization to receive legal advice to make the most of its articles of incorporation. Specifically state that your organization will not disseminate extra revenue to its owners, or, upon filing, you may be deemed a for-profit business for tax purposes.
Draft bylaws for the organization. Bylaws state how the board of directors operates, what powers they have and delegate powers of authority with the board and other staff. Some states require bylaws when filing for incorporation, and this document also is important in a nonprofit charter.
File for incorporation with the correct state agency, including the bylaws and/or mission statement if required. There often is a fee associated with filing for incorporation, which varies by state. In some states, fees for filing incorporation papers are waived for nonprofits.