Nonprofit Status- What We Need to Get Started

Checklist for establishing a 501(c)(3) in North Carolina


http://www.ncnonprofits.org/faq/HowToStartA501%28c%29%283%29Nonprofit.pdf



1. Establish a Board of Directors
“NC law requires only one board member, but best practices recommend that you have no fewer than five; seven or more are preferable.”
Roles and Responsibilities of board members: “selecting and reviewing the performance of the chief executive; recruiting new board members; ensuring effective organizational planning; evaluating organizational performance; providing financial oversight; and ensuring legal and ethical integrity”, etc.

2. Establish the organizations mission and purpose, short- and long-term goals identifying who the organization will serve, clarifying the driving values behind the organization, and planning for how the organization’s mission may evolve.

3. Create organizational bylaws (“It’s helpful to review those of existing non-profits and to have a lawyer review them before they’re finalized.”) (“In both membership and non-member corporations, a set of rules known as the bylaws governs the internal administration and regulation of the affairs of the corporation. The bylaws may contain any provisions not inconsistent with the law or the Articles of Incorporation. The initial bylaws must be adopted by the incorporators or board of directors. A complete set of the bylaws, however, will not be filed with the N.C. Department of the Secretary of State.”)

4. Incorporate by registering with the NC Department of the Secretary of State
(www.secretary.state.nc.us/corporations)

Articles of Incorporation for NC then require:

-Corporate name: “The exact corporate name, including abbreviations, punctuation, etc. must be used consistently in all documents files”

-A statement to the effect that the organization is a “charitable or religious organization.”

-Registered office and agent: “A nonprofit corporation is required to have a registered office and a registered agent…The duty of the registered agent is to forward to the corporation at its last known address any notice, process, or demand that is served on the corporation.” A registered agent, in most cases, must be an individual who resides in North Carolina and whose business address is identical to the registered office. “The Articles of Incorporation must set forth the street address of the registered office, as well as the county in which the registered office is located, and the name of the initial registered agent. The registered office may, but need not be, the same as any of the corporation’s places of business.

-Incorporator: “the person who signs and files the Articles of Incorporation is known as the incorporator. There must be at least one incorporator. The name and address of each incorporator must be indicated”

-Members: Under NC law, a non-profit may or may not have members. If it is to have members, this must be specified in the Articles of Incorporation. If it is to have no members, this must also be specified.

-Provisions for Distribution of Assets: Must include provisions regarding distribution of corporations assets upon its dissolution and termination. A fair amount of flexibility, but do have to be consistent with NC law (consult N.C. Gen. Stat. 55A-14-03 “Plan of Dissolution”)

-Principal Office: A nonprofit corporation is required to set forth its principal office address in its Articles of Incorporation.

-Optional Provisions: Can include:

A statement of the purpose or purposes for which the corporation is organized;
The names and addresses of the initial directors;
Provisions relating to management and regulation of the corporation’s affairs;
Provisions which define, limit, or regulate the powers of the corporation, its directors, and its members (or any class of members);
Provisions defining the qualifications, rights, and responsibilities of. its members; and
Provisions limiting or eliminating the personal liability of any director for monetary damages for breach of any duty as a director.

That last one about eliminating personal liability is important.



-Statutory Powers (all nonprofits in NC have these, and they don not need to be stated in the Articles of Incorporation)
Among these statutory powers are the following: to sue, and be sued; to complain and defend in the corporate name; to have and affix a corporate seal; to purchase, lease, acquire, hold, use, own, or otherwise deal in and with any real and personal property; to make contracts and incur liabilities; to elect or appoint officers; to make and alter bylaws; to lend money for corporate purposes; and to have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is organized.




Filing the NC Articles of Incorporation – must be submitted by mail or in person to the N.C. Department of the Secretary of State, along with check, money order, or cash for the required $60 filing fee.


Tax-exempt Status

“It is crucial to keep in mind that not all nonprofit corporations are automatically tax-exempt. Before commencing its operations, the corporation must decide whether it can qualify for tax-exempt status. This may be necessary in order for the corporation to avoid paying taxes on its income and in order for donors to claim tax deductions for contributions. Whether a corporation has obtained federal tax-exempt status is a relevant factor in the state’s decision to also grant exempt status. Thus, the federal application should be made first. Often, this will have a substantial bearing on any subsequent grant of exemption by the state.”




So, first: Board of Directors, bylaws, and NC Articles of Incorporation.

Then, we have to begin Federal IRS paperwork.

It is strongly recommended that we have an accountant or CPA familiar with nonprofit tax law review our application before submission- Does anyone know one of these?

And, we will then hear back from the IRS in 3-24 months.

Time to get started now, I think.