How to form a 501(sc)(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 Arkansas.
(piano playing)
If you're not sure what a non-profit is,
check out our other video,
"What is a Nonprofit?" link 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 nonprofits name.
The name you select for your non-profit
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 Arkansas.
You'll need to check Arkansas' 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 Arkansas.
For more information on what makes a name distinct,
check out our other video,
"How to name your business in Arkansas" link below.
Once you have a name selected,
do a name search to make sure it's available in Arkansas.
After doing an Arkansas 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 Arkansas.
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 fine 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 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 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 surf wealth roles if allowed to do so
by the organizational bylaws,
which we will discuss later.
If your organization plans to apply
for 501 (sc)(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.
One person may hold two or more offices.
Four, file the articles of incorporation.
To form a nonprofit corporation,
you will need to file official papers with Arkansas.
In Arkansas, this is called the "Articles of Incorporation".
Some possible information in the articles
of incorporation you may have to include is;
entity name, entity type,
membership, power, purpose,
dissolution, registered agent,
and registered office, and Incorporators.
For more information on the sections of Arkansas'
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 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
link 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(sc)(3) status,
opening a bank account, applying for tax exempt status,
and submitting tax returns.
For more information on EIN's,
check out our other video linked below.
Nonprofits in Arkansas will also need to register
for state tax accounts and IDs.
This can be accomplished by filling out
the new business registration located
at the Arkansas Taxpayer Access Point (ATAP),
which is linked below.
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 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 easy 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, you can file
for state income tax exemption using Form AR1023CT,
which is 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 nonprofits behalf.
If you want to form an organization or company
in Arkansas 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 organization in Arkansas.
For a more detailed guide,
visit our site at StartupSavant.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.