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 Pennsylvania.
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 Pennsylvania.
You'll need to check Pennsylvania'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
that could be considered grossly offensive or misleading.
The name must be distinct from that of any other corporation
in Pennsylvania.
For more information on what makes a name distinct,
check out our other video,
"How to name your business in Pennsylvania." linked below.
Once you have a name selected,
do a name search to make sure it's available
in Pennsylvania.
After doing a Pennsylvania 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 in the company,
including yourself.
Or you can hire a professional service
authorized to do business in Pennsylvania.
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.
If your organization plans to apply for 501c3 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 Pennsylvania.
In Pennsylvania,
this is called the articles of incorporation.
Some possible information in the articles of incorporation
you may have to include is
entity name, registered agent and registered office,
purpose, membership, incorporators,
effectiveness of filing and any supplemental information.
For more information on the sections
of Pennsylvania's articles of incorporation,
check out our page linked below.
Five, operating procedures and housekeeping.
After the articles of incorporation are approved,
you must publish your filing
in two general circulation county newspapers.
One of which must be a legal newspaper.
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.
And EIN is like a social security number for your nonprofit.
And it's used for things like filing for 501c3 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.
As a nonprofit in Pennsylvania,
you will also need to register for appropriate
state level tax IDs using form PA-100, linked below.
Six, apply for 501c3 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 nonprofit's 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 501c3 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 a fee of $275.
You can check your eligibility with the link
in the description below.
Once you've received your 501c3 determination letter
from the IRS,
you will automatically be exempt
from Pennsylvania state corporate income tax.
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 501c3 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 nonprofit's behalf.
If you want to form an organization or company
in Pennsylvania,
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 Pennsylvania.
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.