How to Form a Non-Profit LLC

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Non-profit organizations enjoy special tax and legal privileges. Informal non-profit organizations are little more than a group of like-minded people pooling their resources to achieve some aim. Incorporation into a LLC provides the group with tax exemption and limited liability. This means that the debts and legal issues of the organization are not those of the individual members. In addition, incorporation allows for donations given to the organization to be used as tax write-offs by donors. This can greatly increase the amount of money your organization takes in. The official designation for a non-profit LLC is 501 (c) (3). There are many legal and technical aspects to incorporating, and these vary from state to state. You may want to hire a lawyer to help through the highly technical parts of the process.

Contact your state's Corporate Filing Division. The Division will have most of the forms you need and may have sample materials you can pattern your non-profit after. Be sure to get the formal paperwork you will need to file from them. Usually this paperwork is referred to as the "articles of incorporation". You will need to contact them several times during the process of incorporation.

Decide on a name for your non-profit. The name must be distinct from other corporate names and cannot use any of the words banned by law for use in corporate names. These banned words can vary by state. Most states prohibit using the words "Bank", "Reserve", "Cooperative", "United States", "Federal" and "National". Come up with several names in case the name you have chosen is taken.

Ask the Corporate Filing Division if your corporate name is acceptable. If it is not already taken and does not violate the banned words list or trademarks of other corporations, it should be accepted.

Contact the IRS and ask for a 501 (c) (3) tax exemption status application. You can read the rules about applying at the IRS website. Search for IRS publication 557.

Fill out the articles of incorporation. Each state has different rules as to how these must be filled out in order to gain tax exempt status. You may want to work with a lawyer or find a good resource on incorporation laws in your state. There are many books available on this topic. Alternatively, the Corporate Filing Division should be able to help you make sure the language is right. Send your articles of incorporation to the Corporate Filing Division along with your payment for the filing fee. This fee varies from state to state.

Fill out the tax exemption status application and wait for a response from the Corporate Filing Division. The Division should send you an approved copy of your articles of incorporation. Send the completed application and the articles to the IRS.

Ask the Corporate Filing Division if you need to file for state tax exemption separately. This is only required in a few states. If your state requires this, you will need to complete those forms and send them in as well. Usually you will also have to send your articles and the letter from the IRS granting you federal tax exemption.

Write the bylaws for your non-profit. These are the rules and regulations your company will follow. Be sure to include how board members are selected, how voting occurs, and how often voting takes place.

Appoint directors to run the non-profit. These need to be people who can steer the corporation and accomplish the goals of the group. Directors will vote to determine who will be elected to different offices within the corporation.

Hold the first meeting of the board of directors. The directors will need to formally adopt the bylaws and vote on officers to run the company. Most states require at least a president, treasurer, and secretary be elected for a non-profit.

Acquire the licenses and permits you need in order to operate your company. Depending on what you are doing and where the corporation is located, you may need to get licenses to give services or sell items. Check with your state department of consumer affairs.


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  • business image by peter Hires Images from Fotolia.com