There are numerous benefits to formalizing your group into a nonprofit organization. Nonprofits can receive tax-deductible donations and apply for government grants. In addition, forming a nonprofit shelters group leaders from legal liability. However, starting a nonprofit club requires filing legal documents on both the federal and state level. The process can be time-consuming and expensive if you hire an attorney. Learn what you need to do to start a nonprofit club, so you can decide whether the benefits outweigh the cost.
Organize your club members. Find out if the majority of members are interested in becoming a formal nonprofit group. Elect members into director and board member positions. If necessary, collect dues for incorporation fees. Decide on a group purpose and mission statement.
Draft and file articles of incorporation. Incorporate as a nonprofit organization in your state. Contact your local Secretary of State or Attorney General for specific requirements. If necessary, employ a licensed attorney to assist with drafting your club's articles of incorporation. There is often a small filing fee when submitting corporation documents. For example, the state of California charges $30 for nonprofit organization filing fees.
Write corporate bylaws for your nonprofit club. You may want an employer to assist with writing the corporate bylaws, since it is a legal document. Corporate bylaws are easily amended by the group's board members. The document should specify operational information, such as the group's mission, membership requirements and board member duties. Meet with the club's board members to review and approve the final draft.
File for an employee identification number (EIN) and tax-exempt status with the IRS. The necessary forms are available at IRS.gov. An EIN is needed, even if the group does not hire employees. The EIN serves as your group's tax identification number, similar to a person's social security number. For example, you will need an EIN to open the organization's bank account. Federal tax exempt status will exempt your group from federal income taxes.
Comply with state nonprofit requirements. In addition to federal requirements, your state may have its own nonprofit requirements. Apply for a sales tax exemption from your state's tax board. Also, apply for a state tax identification number. If required, register as a charity with your state's attorney general.
- Companies such as Legalzoom.com offer document preparation and filing services for nonprofit organizations. The cost is often lower than hiring an attorney.
- Purchase liability insurance for your nonprofit group, especially if you plan to organize community events and participate in fundraising activities. Insurance will help protect your nonprofit group's operating budget from legal liability.
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