Welcome to the Empire State, where starting a nonprofit can be a powerful way to make a difference in your community. With over 100,000 nonprofits already making a significant impact in New York, you’re joining a community of change makers. In this post, we’ll guide you through the step-by-step process for starting a nonprofit in New York and obtaining tax-exempt status, empowering you to contribute to this inspiring movement.
Pick a Name
Naming your organization is one of the most important and exciting tasks you’ll undertake! Choose a name that conveys your organization’s purpose and is memorable for potential donors and constituents. You also need to consider the specific requirements set by New York. Unless an exemption applies, the corporation’s name must contain one of the following words or abbreviations: Incorporated, Corporation, Limited, Inc., Corp., or Ltd. We’ll guide you through this process, ensuring you’re well-prepared to make this significant decision.
You cannot use a name currently registered in the state, so you also want to check the availability of your chosen name (https://apps.dos.ny.gov/publicInquiry/). Consider a few variations that in the event your preferred name is unavailable.
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 provide a strong foundation for your nonprofit’s operations, giving you the confidence that your organization is in good hands. Typically, a board comprises critical positions such as a president, treasurer, secretary, and other roles necessary for effective organizational governance.
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.
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 big one! Incorporation establishes your organization legally in New York, making everything official. The Articles of Incorporation are legal documents that include essential information about the nonprofit, such as its name, address, incorporator, registered agent, and more.
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. New York does not include these automatically when filing.
New York charges a $110 filing fee and typically processes applications in one to two days with expedited processing.
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.
The IRS requires specific clauses in your Articles of Incorporation addressing the organization’s purpose and dissolution. 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. These clauses are specific to all tax-exempt nonprofit organizations and are different from the primary purpose the organization is trying to fulfill.
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 and may delay your 501(c)(3) status.
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 nonprofit to conduct various business activities, such as opening bank accounts, filing state and federal taxes, and hiring employees.
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 about the ongoing New York state compliance requirements, please visit the New York Nonprofit Requirements page here!
Summary
Starting a nonprofit in New York may seem daunting, but the process can be more straightforward with the proper guidance and a well-defined plan.
If you need help establishing a nonprofit in New York, contact BryteBridge. Our team of experts is readily available to provide the support and guidance you need. Contact us today to get started on your nonprofit journey.
