Thankfully, many people have a good heart and even better intentions, which is the main reason why there are so many nonprofits and tax-exempt organization in America. Some are one-person organizations, while others have hundreds of employees. Most, but not, all are also tax-exempt.
This column will go through the steps of forming a Washington state nonprofit organization.
One important thing to mention is that a nonprofit organization is not the same as a tax-exempt organization. A nonprofit organization is a creature of state law. In Washington state, a nonprofit organization is incorporated under RCW 24.03. A nonprofit corporation is, by default, a taxable corporation, unless an application for tax exemption has been made to the IRS.
How to get started
Before starting a nonprofit, you will need to think about what the nonprofit should aspire to accomplish; this is often considered the nonprofit’s purpose.
In addition, you will also need to identify at least one person who will be an initial member of the board of directors, although it is generally recommended that you have at least three members of the board. You will also need to name the initial board of directors in the Articles of Incorporation; the same is the case for the registered agent.
The registered agent must be in Washington state. The registered agent will receive all documentation from the state. It can be another corporation or an individual — just make sure it is someone who is responsible.
After you have identified the above, you are ready to form your nonprofit, which is done by filing Articles of Incorporation with the secretary of state. You can find a sample form on the secretary of state’s website: www.sos.wa.gov/corps/Forms.aspx. The form may also be filed online: ow.ly/yCJ7g.
It is more expedient to file online if the purpose is to apply for tax exemption. You must make sure, however, that the required tax-exempt language is used. Suggested tax-exempt language can be found on the following site: ow.ly/yCJ7g.
Once you have filed your Articles of Incorporation, your nonprofit is official and you can get started.
Setting the rules
If one of your ideas involves fundraising, make sure you register properly after reviewing the requirements: www.sos.wa.gov/charities.
There are several things to consider if you want to run a nonprofit successfully. One of the first things you should do is to create and adopt bylaws. The Bylaws for Nonprofit Corporations are the rules and procedures for how a nonprofit corporation will operate and be governed. Although there are no set criteria for bylaw content, they typically set forth internal rules and procedures for the nonprofit corporation, touching on such issues as:
•The existence and responsibilities of nonprofit corporate officers and directors;
•The size of the board of directors and the manner and term of their election;
•How and when board meetings will be held, and who may call meetings;
•How the board of directors will function; and
•How grant monies will be distributed, if any.
Once the bylaws are complete, they should be adopted by the board of directors.
The next step is to open a bank account. You should never use your own Social Security number to open a bank account for a nonprofit organization; instead, you should obtain an EIN (employer identification number). It is very easy and can be obtained online directly from the IRS at ow.ly/yCJNw.
At this point, you have completed the basic steps of forming a nonprofit, and it is ready for operations. The next step is most likely to apply for tax-exempt status.
In many ways, a nonprofit is very similar to running a business, so it is important to develop a budget and a plan. Your nonprofit may be subject to state and local taxes (even if tax-exempt).
If you are serious about starting a nonprofit, I highly recommend that you obtain a copy of the “Washington Nonprofit Handbook”; it can be downloaded for free at ow.ly/yCK2E.
If you need additional assistance, there are several options available. The Nonprofit Assistance Center operates a nonprofit legal clinic on the third Monday of the month; appointments can be made by calling (206) 324-5850, Ext. 301. Pro bono assistance is also available through Wayfind (wayfindlegal.org).
MONICA LANGFELDT is founding partner at Queen Anne-based Langfeldt Law PLLC (www.langfeldtlaw.com). To comment on this column, write to QAMagNews@nwlink.com.