- 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 Hawaii.
(soft music)
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 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 Hawaii.
You'll need to check Hawaii'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 Hawaii.
For more information on what makes the name distinct,
check out our other video
'How to name your business in Hawaii' linked below.
Once you have a name selected, do a name search to
make sure it's available in Hawaii.
After doing a Hawaii named 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 Hawaii.
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 formed 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 an officer who prepares meeting minutes
and authenticate records of the corporation.
Four, file the certificate of formation.
To form a nonprofit corporation,
you'll need to file official papers in Hawaii.
In Hawaii, this is called the Articles of Incorporation.
Some possible information in the Articles of Incorporation
you may have to include is: entity name and type,
mailing address, registered agent and registered office,
incorporator, membership and return address.
For more information on the sections of Hawaii 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 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 future.
When you're ready to get started, check out
some bylaws templates, linked in the description below.
The conflict of interest policy or the rule, 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 Employer 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.
The State of Hawaii offers a consolidated
tax registration application, Form BB-1
which is linked below.
This can be filed online or submitted by mail.
You will use this for submitting state income
and sales taxes as applicable for your organization.
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 non-profit 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 a fee of $275.
You can check your eligibility with the link
in the description below.
Once you've received your 501(c)(3) determination letter
from the IRS, your organization will also
be exempt from Hawaii 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 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 nonprofit's behalf.
If you want to form an organization or company in Hawaii
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 Hawaii.
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.