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 Colorado.
(gentle music)
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 non-profit'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 Colorado.
You'll need to check
Colorado 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 Colorado.
For more information on what makes a name distinct,
check out our other video,
how to name your business in Colorado,
linked below.
Once you have a name selected
do a name search to make sure it's available in Colorado.
After doing a Colorado 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
within the company, including yourself,
or you can hire a professional service
authorized to do business in Colorado.
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 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 if allowed to do so
by the organizational bylaws, which we we'll 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.
Four, file the Articles of Incorporation.
To form a nonprofit corporation,
you will need to file official papers with Colorado.
In Colorado, this is called the Articles of Incorporation.
Some possible information in the Articles of Incorporation
you may have to include is entity name,
501(c)(3), principal office,
registered agent and registered office,
incorporator, members, distribution of assets
and effectiveness of filing.
For more information on
the Sections of Colorado'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 non-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 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
lined in the description below.
The conflict of interest policy
are 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 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
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 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 is automatically exempt
from Colorado corporate 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 non-profit's behalf.
If you want to form an organization or company
in Colorado with the purpose being to help a cause
rather than to 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 Colorado.
For a more detailed guide,
visit our site at StartupsSavant.com.
Give the video a like if you found it useful
and subscribe if you'd like to see more.
If you have questions or encounter any roadblocks
leave a comment below.
Good luck in starting your nonprofit.