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 Maryland.
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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 Maryland.
You'll need to check Maryland 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 Maryland.
For more information on what makes a name distinct,
check out our other video,
"How to Name Your Business in Maryland,"
linked below.
Once you have a name selected,
do a name search to make sure it's available in Maryland.
After doing a Maryland 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 Maryland.
They will send and receive
legal papers on your behalf.
These documents include official correspondence,
like legal summons and documenting 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 a nonprofit.
They also oversee management level hiring,
such as the company officers.
The officers of a nonprofit,
such as the president or the secretary,
are individuals with responsibilities
and the authority to execute based on their job description.
Together, the officers
and 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,
a president,
a secretary and a treasurer.
Four, file the articles of incorporation.
To form a nonprofit profit corporation,
you will need to file official papers with Maryland.
In Maryland, this is called the Articles of Incorporation.
Some possible information
on the Articles of Incorporation
you may have to include is,
incorporator, corporate name,
purpose,
principal office,
registered agent
and registered office,
supplemental provisions and execution.
For more information on the sections
of Maryland'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 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 organization 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 chairmen,
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 corporation 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 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 the 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 a 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.
For exemption from Maryland's
state income tax in the following,
a letter requesting an exemption from Maryland income tax,
a copy of the IRS determination letter,
a copy of the bylaws,
an explanation of the purpose of your organization,
and the latest financial statement of your nonprofit.
For more detailed information
on the address of where to send these documents,
check out our page linked below.
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 Maryland with the purpose being
to help a cause rather than make a profit,
a nonprofit corporation is the best way to do that.
Now you know all the steps to form a nonprofit in Maryland.
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.
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