Helping others in your own way
— How to form a nonprofit
Do you have a passion for helping others? Are you thinking about starting an amateur sports club or want to do something to help animals? Then perhaps it has crossed your mind that you could start a nonprofit.
In Montana, we are fortunate to have a thriving nonprofit community. Not only do we have a great network of nonprofits, but we also have a great community of people who support these nonprofits. Further, nonprofits can enjoy benefits such as no taxation on its income.
If you are considering starting a nonprofit, there are a few steps you need to take to make sure your nonprofit is authorized to do business in your state. Then, you also need to apply for tax-exempt status with both the Internal Revenue Service and your state taxing authority.
Organizing the nonprofit under state law
Most nonprofits are corporations that must follow certain formalities under state law. In Montana, nonprofit corporations must file Articles of Organization with the Secretary of State for a nominal fee. In the Articles, you will have to designate a Registered Agent (i.e., a person or an entity who will accept service of process on behalf of the nonprofit) and list your appointed directors. A nonprofit corporation must have at least three directors in Montana.
After your Articles are filed, you will need to have an organizational meeting where the directors make important decisions such as nominating officers, authorizing the creation of a bank account and who will have access to that bank account, and approving bylaws.
Applying for 501(c)(3) tax-exempt status
Forming a nonprofit under state law does not automatically make the entity exempt from taxation. Nonprofits must apply for tax-exempt status with the Internal Revenue Service and with the state taxing authority (i.e., the Department of Revenue here in Montana). The tax-exempt applications can be complex, but are well worth the effort to receive tax-exempt status. You will have to pay a filing fee for the IRS application, which ranges from $275-600. The Montana Department of Revenue does not currently charge a fee.
Keeping the nonprofit in good standing
After successfully forming your nonprofit under Montana law and obtaining tax-exempt status at both the federal and state level, you will need to do a few things to keep the nonprofit in good standing. First, you will need to file an annual report with the Montana Secretary of State. In this report, you will update the state with changes to your nonprofit such as new directors or address changes. Second, you will need to file an annual information return, called a 990, with the IRS. If you need help keeping up with your entity’s filing obligations—whether for a nonprofit or a for-profit entity—we offer a Business Entity Record Maintenance service to help you stay on top of these important requirements.
Navigating the legal requirements of forming a nonprofit may seem complex. Worden Thane’s attorneys can help you form the nonprofit and keep it in good standing so that you can focus on what matters most to you: helping others. Contact us today to talk about how can help you form a nonprofit!