How to form a 501C3 nonprofit corporation.
A nonprofit corporation is purpose-driven,
a company whose goal is not to make profit for themselves.
Typically they are an organization that wants to make money
in order to help further a social cause,
or provide a public benefit.
Let's get you started on the right path
to forming a nonprofit corporation in Alabama.
(piano begins)
If you're not sure what a nonprofit is,
check out our other video, what is a nonprofit linked below.
How do you form a nonprofit corporation?
There are two ways, you can do it yourself,
or you can hire a service to do it for you.
Let's take a look at both options and help you decide
how to go about forming your own nonprofit corporation.
Option one, do it yourself.
If you want to save money,
you can form a nonprofit corporation on your own.
Let's take a look at the six steps
to forming a nonprofit corporation on your own.
One, choose and secure your nonprofits' name.
The name you select for your nonprofit
will establish its brand.
It's the first thing most people will learn
about your organization.
It's important to pick a name
that both aligns with your mission
and follows the rules of naming guidelines in Alabama.
You'll need to check Alabama's specific naming requirements,
but in general, follow these rules when choosing a name.
The name you pick for your organization should not
include any words or terms that could
be considered grossly offensive or misleading.
The name must be distinct from that of any other corporation
in Alabama.
For more information on what makes a name distinct,
check out our other video,
how to name your business in Alabama linked below.
Once you have a name selected, do a name search to
make sure it's available in Alabama.
After doing an Alabama name search, you'll want to
do a domain search to see if your name is available
as a URL.
Even if you don't plan on making a website today
you may want to secure the URL
so someone else doesn't take it.
Two, appoint a registered agent.
The registered agent can be an individual
within the company, including yourself, or you
can hire a professional service authorized to do business
in Alabama.
They will send and receive legal papers on your behalf.
These documents include official correspondence
like legal summons and document filings
which your registered agent will receive and forward to you.
Your registered agent will also help remind you to
file the necessary reports, failure to properly
maintain your nonprofit can result in fines and disillusion.
So this assistance is valuable.
Three, select directors and officers.
Your nonprofit corporation will be made up of some number
of directors and officers.
The directors of a nonprofit are responsible
for overseeing the operations of the organization
Together, they form the board of directors,
the power and influence of the directors
over the organization comes from them as a board.
The directors themselves do not have any authority
as individuals.
The board typically creates the policies that govern
the nonprofit.
They also oversee management level hiring such
as the company officers.
The officers of a nonprofit, such
as the president or secretary are individuals
with responsibilities and the authority to execute based
on their job description.
Together, the officers on the board will come together
to make up the organizational structure of your nonprofit.
An officer may also be on the board of directors
and serve both roles if allowed to do so
by the organizational bylaws, which we will discuss later.
The organizational structure of your nonprofit
in Alabama must include at least three directors not related
to each other, a president, a vice president, a secretary
and a treasurer.
Note that the president and secretary positions
can not be held by the same person.
To learn more read our guide on how to select board members
for your nonprofit link below.
Four, file the certificate of formation.
To form a nonprofit corporation, you will need to file
official papers with Alabama.
In Alabama, this is called the certificate of formation.
Some possible information in the certificate
of formation you may have to include is:
entity name,
name reservation,
membership,
principal office
registered agent,
registered agents office,
purpose,
duration, incorporator directors,
change of directors
and any supplemental provisions in information.
For more information on the sections
of an Alabama certificate of formations, check out our page
linked below.
Five operating procedures and housekeeping.
Once your nonprofit corporation has been formed,
you'll want to start getting the structure of it together
and determine how your nonprofit will be run.
Starting with the bylaws and conflict of interest policy.
Your bylaws are the rules that determine how
your organization would be governed and run.
You can think about it as a constitution for your nonprofit.
It makes the rules and priorities clear
for everyone involved.
In your bylaws be sure to include how the nonprofit will be
governed,
the roles of directors and officers,
how meetings are held, voting procedures,
electing officers or directors,
how records will be kept and managed,
how disputes will be handled
and how bylaws will be added and amended in the future.
When you're ready to get started
check out some bylaws templates, linked in
the description below.
The conflict of interest policy are the rules set to ensure
that decisions being made for the nonprofit are based
on what is best for the organization
and not being motivated by what is best for individuals.
You'll want to make sure you have a draft
of both the bylaws and conflict of interest policy before
your organizational meeting.
We have templates of both bylaws and conflict of interest
policy linked in the description below.
An organizational meeting is the first official meeting of
your nonprofit.
Some of the things that are discussed in a typical
organizational meeting are:
taking attendance to show you have decorum,
appointing temporary officers and chairman,
adoption of bylaws
and adoption of conflict of interest policy.
It's important to record minutes of the meeting
and have it signed by all attending directors.
We have some corporate minutes templates linked
below to help you get the ball rolling.
After your nonprofit has been formed, you'll need to apply
for an EIN or employment identification number.
An EIN is like a social security number for your nonprofit.
And it's used for things like filing
for 501 C3 status, opening a bank account,
applying for tax exempt status and submitting tax returns.
For more information on EIN's, check
out our other video linked below.
Non-profits in Alabama must also register with the
Alabama department of revenue for applicable state taxes.
This can be accomplished by completing my Alabama taxes
registration online, which we have linked below.
For more information, you can call the department
of revenue at (334) 242-1490 or visit them at their website.
also linked below.
Six, apply for 501 C3 status federal tax exemption.
What is federal tax exempt status?
And why do you want it?
When a corporation generates income
that corporation has to pay a federal income tax.
As a nonprofit, your goal is to generate income
that is used to help further a cause rather than
fill the pockets of the company employees.
Because of this, the federal government allows that
nonprofits income not be taxed so that more of the money can
go towards the cause that the nonprofit is supporting.
Before your nonprofit can apply for 501 C3 status,
it must file the certificate of formation
with the required provisions, adopt the bylaws
and conflict of interest policy and have an EIN number.
In order to file for tax exempt status,
most organizations will need to file form 1023 online
or by mail and pay a fee of $600.
If your organization's annual gross receipts are
below $50,000, then you may be able to file form 1023EZ
with the fee of $275.
You can check your eligibility with the link
in the description below.
Once you've received your 501 C3 determination letter
from the IRS, you will automatically be exempt
from Alabama state income tax.
Option two.
The second way to form a non-profit is to hire a
professional service, to create your nonprofit for you.
Hiring a professional service to file your forms and act
as your registered agent for the nonprofit will cost you
an additional $50 to $150.
This fee only covers formation of a nonprofit corporation.
If you wish for the professional service to file
for 501 C3 status, the cost may go up to as much
as $1,700 plus filing fees.
However, there are several benefits to working with a pro.
A hired registered agent helps with getting your reports
filed on time, helps you stay organized by keeping your
business mail separate
and is available at all regular business hours to accept
official mail and legal papers on your non-profits behalf.
If you want to form an organization or company
in Alabama with the purpose being to help a cause rather
than to make a personal profit,
a nonprofit corporation is the best way to do that.
Now, you know, all the steps, to form
a nonprofit in Alabama.
For a more detailed guide visit our site at
startupsavant.com.
Give the video a like if you found it useful and
subscribe if you'd like to see more.
If you have questions or encounter any roadblocks,
leave a comment below.
Good luck and starting your nonprofit.