Starting a Nonprofit: Incorporation

Incorporation is usually conducted through the Secretary of State’s office, or through another state agency. Details about incorporation are often readily available on the Secretary of State’s website. In some jurisdictions, online forms can be completed to incorporate. There also may be an option to mail in the completed forms, or to deliver the forms in-person to the agency’s office location.

 Most states require a filing fee, usually $100 or less for nonprofit organizations.

 The details of what must be included in the initial incorporation vary from state to state. These items may include the name of the corporation, the business address, the name and address of a registered agent within the same state, the name and address of incorporator(s), the purpose of the organization, the duration of the corporation, the names and addresses of initial board members, whether the organization is a continuation of another entity, and who receives the assets if the corporation is later dissolved.

 When selecting the name of the corporation, it is important to follow the specific state’s rules as to the availability of the name selected for the entity. Some states provide an online tool for checking the availability of a desired corporate name, and for a means by which to reserve an available name while the incorporation process is pending. Further, each state has rules as to whether certain corporate identifiers (such as the word “Inc.”) must be, or may be, included in the corporate name.

 Even if the desired corporate name is available within the jurisdiction, other entities may have intellectual property rights in the name selected, which should also be considered.

 The registered agent is the person, or corporation, who will receive any official notices by mail on behalf of the new entity. Most states require a name and address within their state so that it is clear to the state, and to other parties, as to where to direct any legal notices to the corporation.

 Incorporators are the persons who are forming the corporation and accept legal liability for its actions until such time as a board of directors assumes that liability. Some states merely require an incorporator be listed; others require names of initial board members.

For a nonprofit organization, the purpose statement included on the incorporation document is vitally important. Not only must it be consistent with the state’s requirements for the purpose of a nonprofit organization, but if the entity intends to apply for tax-exempt status with the IRS, then the purpose statement must also satisfy IRS requirements. As noted above, it is advisable to consult with an attorney when incorporating. Counsel can help ensure the purpose statement is accurate and thorough enough to cover all requirements, and to avoid the need to amend the incorporation document later.

Note: Because incorporation is a state-specific issue, it is advisable to consult with an attorney who is licensed to practice law in the state of incorporation for assistance.