Did you know that over 100,000 nonprofits are serving the Florida economy? Starting a nonprofit is not just a personal endeavor, but an excellent way to make a significant impact on your community. In this post, we’ll guide you through the step-by-step process for starting a nonprofit in Florida and obtaining your 501(c)(3) status.
Select a Name
As every nonprofit is a legal entity, the name you choose carries significant weight. It’s not just a label, but a representation of your organization’s purpose and a key to attracting potential donors and constituents. This decision is one of the most challenging you’ll face in starting your nonprofit. Remember, the name must meet the specific requirements set by Florida and include a corporate suffix such as Corporation, Corp., Incorporated, Inc., Company, or Co. Your chosen name will be your organization’s first impression, so choose wisely.
You cannot use a name currently registered in the state, so you also want to check the availability of your chosen name. Consider a few variations that can be registered instead if your chosen name is taken.
Establish a Board of Directors
The Board of Directors is the backbone of your nonprofit, assuming the crucial responsibility of guiding and making decisions on behalf of the organization. It’s not just a group of people, but a team of leaders who play a vital role in the effective governance of your organization. Their leadership will shape the direction and success of your nonprofit. The board is the heart of your organization, ensuring its stability and growth.
Think of the Board as the people who run and manage the nonprofit organization. They are responsible for setting the organization’s strategic direction, ensuring financial stability, and overseeing its operations. They may hire staff members to conduct business but are always responsible for the organization. The Board’s primary role is to provide governance and oversight, ensuring the organization operates in line with its mission and values and remains financially and operationally sustainable.
Per federal regulations, a minimum of three directors who are not related to one another must be appointed (unless the organization is a Private Foundation, where related board members are ok). The organization’s Bylaws typically outline the specific board positions, ensuring compliance with internal guidelines and state requirements.
Incorporate your Nonprofit
This step is a significant milestone in your nonprofit journey. Incorporating your organization legally in Florida through the Articles of Incorporation is not just paperwork, but the foundation of your nonprofit’s legal existence. These legal documents include essential information about the nonprofit, such as its name, address, incorporator, registered agent, and more. The Articles of Incorporation are the birth certificate of your nonprofit, marking its official entry into the world.
Clauses
When the IRS establishes federal tax-exempt status (which we’ll discuss later in this guide), specific clauses must appear in your Articles of Incorporation. Florida does not automatically include these when filing.
The IRS requires specific clauses addressing the organization’s purpose and dissolution (what happens if the nonprofit closes or stops operating). For instance, the purpose clause should state that the organization is organized exclusively for charitable, religious, educational, or scientific purposes. The dissolution clause should outline that the organization’s assets will be distributed for a tax-exempt purpose if it dissolves. Here, the purpose is specific to all tax-exempt nonprofit organizations and is different from the primary purpose the organization is trying to fulfill. Sometimes, the IRS uses the same word to define multiple things. An example of a purpose clause could be: ‘The purpose of this organization is to provide educational opportunities to underprivileged children.’ A dissolution clause could be: ‘In the event of dissolution, all assets of the organization shall be distributed to another 501(c)(3) organization.’
The IRS requires this language to appear on every nonprofit organization’s Articles of Incorporation. While a few states include this language by default, most do not. Filing for tax-exempt status, which we’ll address later in the guide, requires directing the IRS to this language. If it does not appear in the original Articles of Incorporation, an amendment to the language is necessary. This involves preparing a document that outlines the changes you want to make, getting it approved by your board of directors, and filing it with the state. This process may delay your 501(c)(3) status, so it’s important to ensure the correct language is included from the beginning.
Create Organizational Bylaws
Bylaws are a comprehensive set of rules dictating the nonprofit’s operations and governance. They provide a clear framework for how the organization will function and ensure transparency and accountability.
Conflict of Interest Policy
A Conflict of Interest or COI Policy establishes rules to prevent and or to disclose potential profitability conflicts. 501(c)(3) organizations are frequently subject to intense public scrutiny, especially where they appear to have inappropriately benefited their officers, directors, or trustees. The IRS also has an oversight role concerning charitable organizations. A well-written conflict of interest policy is a strategy we encourage organizations to adopt to establish procedures that will offer protection against charges of impropriety involving officers, directors, or trustees, ensuring the highest ethical standards.
Establish a Federal EIN (Employee Identification Number)
Once you have obtained your Articles of Incorporation for your nonprofit organization, the next step is to apply for a Federal Employer Identification Number (EIN). You can do this online through the IRS website or by submitting Form SS-4. This unique number serves as an identifier for your organization and is issued directly by the Internal Revenue Service (IRS). An EIN enables your Florida nonprofit to conduct various business activities, such as opening bank accounts, filing state and federal taxes, and hiring employees. The process of obtaining an EIN involves filling out an application form, providing necessary information about your organization, and waiting for the IRS to issue your unique EIN.
Apply for 501(c)(3) Federal Tax Exemption
Tax-exempt status means that an organization is exempt from paying federal corporate income tax on income generated from activities substantially related to the purposes for which the entity was organized (i.e., to the purposes for which the organization received tax-exempt status).
Did you know there are over two dozen types of 501(c) tax-exempt organizations? 501(c)(3) is by far the most common and well-known, but it may not be the one that fits your organization. Determine which type of 501(c) tax-exempt nonprofit your organization is and prepare the appropriate application. It will likely be the IRS 1023, 1023 EZ, or 1024.
The IRS charges a filing fee of $275 to $600 and typically processes applications in a few months.
Learn standard requirements to apply for 501(c)(3) Exemption.
File Additional State Paperwork
In most states, generating income through fundraising activities to help fund your programs and invest in your organization requires additional registrations upon receipt of 501(c)(3) approval. To learn the ongoing state compliance requirements for Florida, please visit the Florida Nonprofit Requirements page here!
