How to form a 501(C)(3)
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 Arizona.
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If you're not sure what a non-profit 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 nonprofit's name.
The name you select for your non-profit
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 Arizona.
You'll need to check Arizona'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 Arizona.
For more information on what makes a name distinct,
check out our other video,
how to name your business in Arizona linked below.
Once you have your name selected,
do a name search to make sure it's available in Arizona.
After doing an Arizona 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, the 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 Arizona.
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 dissolution, 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 the 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.
If your organization plans to apply for 501(c)(3) status
for federal tax exemptions,
it must elect at least three directors
not related to each other
and at least one officer who is responsible
for recording meeting minutes.
Four, file the Articles of Incorporation.
To form a nonprofit corporation,
you'll need to file official papers with Arizona.
In Arizona, this is called the Articles of Incorporation.
Some possible information in the Articles of Incorporation
you may have to include is,
entity name, character of affairs, members,
known place of business, directors, statutory agent,
certificate of disclosure, and incorporators.
For more information on the sections
of Arizona's Articles of Incorporation,
check out our page linked below.
Five, operating procedures and housekeeping.
No later than 60 days after formation,
you must publish a notification of formation
in a local newspaper for three consecutive publications.
The only exception is if your organization
is located in Pima or Maricopa County.
If your organization does not have a physical office,
then you do not need to publish
if your statutory agent is located in Pima
or Maricopa County.
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 will 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 a quorum,
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(c)(3) status,
opening a bank account, applying for tax exempt status
and submitting tax returns.
For more information on EINs,
check out our other video linked below.
Six, apply 501(c)(3) 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(c)(3) status,
it must file the articles 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 1023-EZ
with the fee of $275.
You can check your eligibility
with the link in the description below.
If your nonprofit corporation
has received a letter of determination from the IRS
declaring it as a 501(c)(3) organization,
it is automatically exempt
from corporate income taxes in Arizona.
Option two.
The second way to form a nonprofit
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(c)(3) 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-profit's behalf.
If you want to form an organization or company in Arizona
with the purpose being to help a cause
rather than 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 Arizona.
For a more detailed guide,
visit our site at StartupSavant.com.
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If you have questions or encounter any roadblocks,
leave a comment below.
Good luck in starting your nonprofit.