- [Lecturer] 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 Vermont.
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 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 Vermont.
You'll need to check Vermont'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 Vermont.
For more information on what makes a name distinct,
check out our other video how to name your business
in Vermont linked below.
Once you have a name selected,
do a name search to make sure it's available in Vermont.
After doing a Vermont name search,
you 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
in the company including yourself
or you can hire a professional service authorized
to do business in Vermont.
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 wealth 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.
A president, a secretary, and a treasurer.
Four, file the articles of incorporation.
To form a nonprofit corporation,
you will need to file official papers with Vermont.
In Vermont, this is called the articles of incorporation.
Some possible information in the articles
of incorporation you may have to include is business name,
non-profit type, business purpose, initial principal office,
registered agent and registered office, officers,
and effective date.
For more information on the sections of Vermont's articles
of incorporation, 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 not profit 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 non-profit
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 non-profit 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 is 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.
Your organization must register
for a Vermont account using form BR-400 linked below.
This can be done online or by submitting the form
to the Vermont department of taxes.
Six, apply for 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.
Once you have received your 501(c)(3) determination letter
from the IRS, your organization is automatically exempt
from Vermont corporate income tax.
Option two.
The second way to a form of 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(c)(3) status,
the cost may go up to as much as $1700 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 nonprofit's behalf.
If you want to form an organization or company in Vermont
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 Vermont.
For a more detailed guide,
visit our site at StartupSavant.com.
Give the video a like if you found it useful
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If you have questions or encounter any roadblocks,
leave a comment below.
Good luck in starting your nonprofit.