Starting A Nonprofit Organization in New Jersey

Step 1 - Plan

Do research and planning on: whether your organization
should be incorporated; what to state in
the certificate of incorporation or other organizing
documents; and whether you want the certificate of
incorporation or other organizing documents to meet
the requirements for obtaining a particular Federal
exemption status, such as Section 501(c)(3) status.
For information on Federal exemption, obtain Publication
557 from the Internal Revenue Service

Step 2 - Draft Organizing Documents

Your organization?s certificate of incorporation or
other organizing documents will include a statement
of the organization?s purposes and certain nonprofit
provisions. The resources available to help you draft
a certificate of incorporation or other organizing documents
include library materials, private attorneys, and
organizations that assist other organizations, such
as the Center for Nonprofit Corporations in North
Brunswick, New Jersey. For information on drafting
a certificate of incorporation

Step 3 - Apply for Federal Employer Identification Number

The Internal Revenue Service advises all organizations
to obtain a Federal Employer Identification
Number (FEIN), including organizations that do not
have employees. If the organization has employees
or applies for an IRS determination letter of exemption,
the IRS will require the organization to have an
FEIN. If the organization opens a bank account in
the organization?s name, the bank will require the
organization to have an FEIN. To request an FEIN,
file Federal Form SS-4, or contact the IRS by phone
(see resource list on page 11). You may also be able
to obtain Form SS-4 from certain libraries and post
offices.

Step 4 - Apply for Federal Exempt Status, if Required or Desired

Consult IRS Publication 557, IRS representatives,
or private professional advisors to determine whether
your organization is required to or should obtain an
exemption determination from the Internal Revenue
Service. For further information, see Federal  Tax-
Exempt  Status on page 5 or call the IRS at
1-877-829-5500.

Step 5 - Comply With Charities Registration Requirements

Many organizations, including all 501(c)(3) organizations
(except certain religious or educational institutions),
are required to register with the New
Jersey Charities Registration Section. For more detailed
information concerning whether your organization
is required to register and how to register,
contact the Charities Registration Section at
973-504-6215 (see resource list on page 11 for complete
name, address, and Web site).

Step 6 - Consider Applying for Sales and Use Tax Exemption

If your organization is an IRC Section 501(c)(3)
organization (or a parent-teacher, fire co., emergency,
or veterans? organization), the organization
may apply for exemption from New Jersey sales and
use tax. Your organization will not be exempt from
paying or collecting sales tax until the organization
applies to the Division of Taxation by completing
Form REG-1E.

Is My Nonprofit Organization Required To Be, Incorporated?

No. While there are advantages to being incorporated,
there also may be certain disadvantages,
such as filing fees and annual filing requirements.
Your organization needs to do research or talk to
professional advisors concerning whether incorporation
is advisable for your particular organization.

Incorporate A Nonprofit Family Foundation

Whether a family is wealthy or not, throughout the year they give (or would like to give) charitably to something.¬  Many give to their church, orphan network, missionaries, humane society, American Red Cross, or other charitable organizations.¬  To give to a charity you need to know of the charity you want to give to.

Instead, a family should have their own foundation or family project with 501c3 status that they can give to on a monthly or yearly basis.¬  The funds given to the foundation are instantly tax deductible, and are maintained, like a savings account, in their account.¬  Then when they give charitably, they can give out of the funds in their foundation when the time arises with more effectiveness and ability.

You have checking accounts, saving accounts, and investment accounts for all your income and spending. You should also have an account for your family charitable giving. 

Once you start a family foundation it is yours forever.¬  You might find that others want to give to your causes and eventually you may want to will your familyís foundation to your children to continue running once you are gone.

New Mexico Nonprofit Incorporate

A non-profit corporation in New Mexico is
defined by statute as a corporation formed for a
purpose not involving pecuniary gain to its members.
It pays no dividends or other pecuniary
remuneration, either directly or indirectly, to its
members. Because a business corporation by its
nature is organized to provide pecuniary benefit to
its shareholders based on profit (regardless of
whether it makes one) it cannot be a ìnon-profitî
corporation.

Incorporating as a non-profit corporation
does not immediately qualify donations to your
organization as tax-deductible, charitable contributions.
For that, you must obtain recognition
from the I.R.S. as a charitable organization under
Section 501,(C),(3) of the I.R.S. Code, using Form
1023. For more information, call the District Office
in Albuquerque.

Incorporate A Nonprofit OR Not-For-Profit

Several replies to this query are correct in the notion that there is no perceived difference between the two terms. Legal statutes even refer to the two terms as being synonymous. But the *practical* legal definition (as established by the wise and beneficient people at the IRS) does make a distinction.

"Not-for-profit" refers to an activity, for example, a hobby (like fishing).

"Nonprofit" refers to an organization established for purposes other than profit-making. Note here that nonprofit does not necessarily mean "charitable."

For example, a "nonprofit" organization can be an association of people who like fishing (though the activity does not have to be not-for-profit).

Legal folk and academicians tend to use the "nonprofit" term, whilst fund-raisers (such as the National Society of Fund Raising Executives) tend to use the "not-for-profit" term. Generally, this does not cause problems since everyone within the sector knows what everyone else means.

There is some feeling that "not-for-profit" more appropriately describes the organizations in this sector to the general public. IMHO, I feel that the use of this term in this manner introduces a layer of complexity on top of the "legal" defintion that only serves to confuse the general public. For this reason, I prefer to use the "nonprofit" term when I speak of organizations that operate without purpose of profit.

Also note that the use of the term "non-profit" with the dash in between the letters. There is no implied or distinctive definition attached to this word (as far as I know). I have noticed the use of this term to introduce concepts
or explain technical aspects of organization when an audience is *not* familiar with nonprofit operations.

Incorporate A For Profit OR Nonprofit ?

1. Is the purpose of your activity to make a profit? Generally, your activity is considered a business if it is carried on with the reasonable expectation of    earning a profit.

2. Do you participate in your activity just for fun? Hobbies ñ also called not-for-profit activities ñ are those activities that are not pursued for profit.

3. Do you depend on income from the activity? If so, your activity is likely considered a business.

4. Have you changed methods of operation to improve profitability? If so, your hobby may actually be a business.

5. Do you have the knowledge needed to carry on the activity as a successful business? People who carry out hobbies just for fun, often donít have the       business acumen to turn their not-for-profit activity into a profitable business venture.

6. Have you made a profit in similar activities in the past? This may indicate your activity is a business rather than a not-for-profit hobby. An activity is    presumed carried on for profit if it makes a profit in at least three of the last five tax years, including the current year ñ or at least two of the last    seven years for activities that consist primarily of breeding, showing, training or racing horses.

7. Does the activity make a profit in some years? Even if your activity does not make a profit every year, it still may be considered a business.

8. Do you expect to make a profit in the future from the appreciation of assets used in the activity? This indicates your activity may be a business rather    than a hobby.

      If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.

      If you are conducting a trade or business you may deduct your ordinary and necessary expenses.

Start A Nonprofit


Should You Start a Nonprofit?


If you primarily want to make changes in society, then you should consider forming a nonprofit
organization (or not-for-profit or nonprofit governmental organization). Nonprofits are focused
primarily on meeting strong, unmet social/public needs, rather than maximizing profits.
Nonprofit organizations usually should constrain salaries and wages to reasonable amounts (at
the time of this writing, there is no standard rule to determine reasonable amounts.) So if you are
interested primarily in getting rich or making a big salary, then form a for-profit (see the section
about for-profits later on in this document).
Various Forms of Nonprofits

Informal Nonprofit

This is an informal gathering of people organized to meet a usually short-term and local need,
e.g., to clean up the neighborhood of litter or to raise funds for a local event. You usually donít
need lots of ongoing resources for these types of activities. You probably donít need to form a
nonprofit corporation (see below).

Nonprofit Corporation (Chartered, Registered)

This status is granted by the state to a nonprofit organization (in Canada, status can be granted by
a province or federally). People form a nonprofit corporation usually when they want to ensure
that their organization is an ongoing entity apart from its members, e.g., the corporation can have
its own bank account and enter into contracts. Also, members of the organization usually are not
directly liable for the effects of corporationís operations (the limited liability shield), unless
members engage in deliberate illegal acts for which individuals can be prosecuted.
Corporations benefit from the oversight and guidance of a Board of Directors (a requirement of
corporations) ñ to some, this lose of power could be a disadvantage. Control of the corporation
is vested in the Board members as a body. The nonprofit corporation is owned by the
community, not by the founder or Board members. Usually Board members are not paid, but
they can be reimbursed for expenses.
Employees must keep the amount of their salaries and wages within reasonable limits. Often, a
nonprofit must be a corporation in order to quality for tax-exempt and/or charitable status from
the IRS or Canada Revenue (see below) in order to avoid paying certain taxes and/or getting
donations/funds from donors/funders.

So if you want to form a nonprofit to get donations/funding, you probably should file with your
state to be a corporation ñ but realize that youíll be working for a Board of Directors and you
wonít own the nonprofit yourself.

Tax-Exempt Nonprofits

The tax-exempt nonprofit usually has features of a nonprofit corporation (described above) in
addition to the following features. The tax-exempt nonprofit can avoid paying certain taxes.
This status is granted by the Internal Revenue Service in the USA and by Canada Revenue
Agency in Canada. Usually the nonprofit must be a corporation to quality for tax-exemption.
These nonprofits are constrained to providing to providing services in accordance with their
mission to meet the public need (otherwise they have to pay taxes on any revenue over a certain
amount). Getting tax-exempt status requires ongoing submission of paperwork to the IRS or
Canada Revenue Agency to retain tax-exempt status.

Charitable Nonprofits

The charitable nonprofit usually has the features of a nonprofit corporation (described above)
and sometimes tax-exempt status in addition to the following features. Donors/funders can
deduct the amount of their contributions (to the charitable nonprofit) from their tax liabilities.
Charitable status is granted by the Internal Revenue Service in the USA and by Canada Revenue
Agency in Canada. Usually the nonprofit must be a corporation to receive charitable status.
People and funders often are much more willing to give money to a charitable nonprofit.
These nonprofits are constrained to providing services in accordance with their mission to meet
the public need (otherwise they have to pay taxes on any revenue over a certain amount). This
status requires ongoing submission of paperwork to the Internal Revenue Service or Canada
Revenue Agency in order to retain charitable status.

Charitable nonprofits must limit the amount of lobbying that they can do (organizations that
engage primarily in lobbying are usually tax-exempt, but not charitable). There often is strong,
ongoing public interest in the operations of organizations, which can result in a lot of effort in the
charitable nonprofit to be transparent and accountable for its operations. Often, a major
challenge in these nonprofits is to generate revenue from fees because clients often have very
limited funding.

If you want to form a nonprofit in order to get lots of donations/funds, then youíll probably need
to be a charitable nonprofit, but youíll also have to report to a Board of Directors ñ and you
wonít own the nonprofit, the public will.

How Do I Register A Nonprofit Corporation in South Carolina?

Answer: 

You will need the following:

ï	Unique name of corporation 
ï	Name and adddress of registered agent in South Carolina
ï	Industry Classification (NAICS Code)
ï	Type of non-profit (i.e., mutual benefit, public benefit, religious benefit, etc.) 
ï	Whether or not the corporation has members (member, in this context, means a person that is acting as a director of the nonprofit corporation)
ï	Address of the principal office 
ï	Statement as to how will the remaining assets of the corporation be distributed upon dissolution of the corporation 
ï	Optional provisions of the Articles of Incorporation, which can be faxed or uploaded to the Secretary of State 
ï	Name, SSN and address of each incorporator 
ï	Signatures of incorporators and directors (if named in the Articles) on the Signature Form, which  can be printed from SCBOS and faxed or uploaded to the Secretary of State 
ï	Federal EIN number 
ï	Name, SSN and address of each corporate officer 
ï	Information abou the previous owner if the business was acquired
ï	The Doing Business As (DBA) name, phone number, physical address, mailing address, and record address for each location in South Carolina
ï	Account Number and routing number (for EFW payments) or credit/debit account number (for credit/debit card payments) and other applicable payment information
ï	
Note:  Those intending to beomce a 501(c)(3) corporation should consider adding the required provisions prior to the first submission, so that a second submission is not required.

Incorporate A Nonprofit Foundation

From many points of view, the most important use of the word 'foundation' is as a description for an organization that controls financial assets and uses them to support charitable or philanthropic work. Often such foundations work by making grants to qualifying nonprofit organizations to support specific projects or the work of the recipient ó the grantee ó in general.

A few large foundations of this sort have household names: The Ford Foundation, the Bill and Melinda Gates Foundation, the John M. OIin Foundation, among others. In all, though, there are a very large number of foundations, most of them relatively small. In 2009, using data from the Internal Revenue Service, the National Center for Charitable Statistics reported that there were nearly 120,000 "private founations" in the United States. Foundations of this sort are increasingly found in other nations as well.

"Private foundation" is a term used in the U.S. Internal Revenue Code. It refers to a tax-exempt entity (usually a corporation or a trust) that is supported by earnings on invested assets or by regularly receiving a few gifts of substantial size. (The other sort of tax-exempt entity is known as a "public charity" and receives its support in the form of earned income or a relatively large number of relatively small gifts.) "Private foundations" in this technical sense of the term are required to operate in specific ways in order to preserve their tax exempt status and avoid paying extra taxes on their income.

Some foundations are closely connected to for-profit corporations; as a group they're called "corporate foundations." Such foundations usually receive a donation from the related corporation's profits each year and work to implement charitable programs in the communities where the corporation operates, education programs related to the corporation's work, and to do other good works. Often the board members of the foundation are senior executives of the corporation that sponsors its work.

Another large group of foundations operate quite differently. Known as "community foundations," they focus on a specific, often quite limited, area and receive donations and bequests from people who want a flexible way to focus philanthropy in that place. Because they typically receive larger numbers of relatively small gifts (at least when compared with the support received by "private foundations"), community foundations in the US are usually classified as public charities by the IRS. Community foundations often manage a large number of "donor-advised funds" into which individuals and families make charitable gifts and from which the community foundation draws funds to implement the donors' philanthropic goals. Once funds have been donated in this way, the community foundation maintains expenditure control and (usually) charges a small annual fee for investment and grant-making services.

Many observers of philanthropy urge people with the means to consider significant philanthropy to think twice before establishing a private foundation. The expense and complication of creating and maintaining small private foundations compares unfavorably, they say, with the alternative of relying on the services of a community foundation to create and operate a donor-advised fund.

There is one other form of foundation that has significant impact. Called "operating foundations", these organizations usually depend almost entirely on endowment income for their work. Instead of making grants to other organizations, operating foundations undertake programs of research, publication, convening and other activities related to their purposes, purposes that usually were specified at the time the foundation was created by a gift or bequest.

Among all these different types of foundations, only a few invite proposals from prospective grantees, and those that do usually focus their grantmaking in very specific ways. The rest either operate their own programs to implement their charitable missions or support organizations with which they have established relationships. Foundations that are willing to review proposals usually publish -- on their websites or in other formats -- advice about how to inquire and how to complete an application. Even if a foundation is listed in a directory of grantmakers, it is a good idea to do quite careful research to avoid wasting time pursuing foundation support.

One further note ó the word "foundation" has no specific legal or financial meaning. There are many organizations with the word foundation in their name that are active in seeking funding from the public and from grantmakers and do not ordinarily make grants or seek partners for operating programs.

Is A Accountant Required To Start A Nonprofit?

It is as likely that you will need an accountant as a lawyer. You can struggle through much of the
legal filings and forms. However, if you do not have at least a basic understanding of bookkeeping
and accounting, then you should get some help. Ideally, you can recruit a volunteer who has
financial management skills, and even becomes your Board Treasurer.

Call the local volunteer organization to see if they can recommend someone. Call several local
corporations to see if they have a volunteer center to help their employees find useful volunteer
positions in the community. Look through the Yellow Pages to find accountant organizations.

Is A Lawyer Required To Start A Nonprofit?

You can do much of the work yourself to incorporate (for example, completing Articles of
Incorporation). Applying for tax-exempt and/or tax-deductible status is more complicated, and your
team would benefit from the advice of a lawyer who understands nonprofit matters (for example,
knows how to complete Form 1023 in the USA). It is very important that your filing for tax-exempt
and/or charitable status be very accurate about the purpose and program of the new organization.
Otherwise, the new organization might not get special tax status at all, or it might get only taxexempt
status and not charitable status. To get references for a good lawyer, ask nonprofits in your
area, or call the local bar association. You might be able to find very low-cost legal fees from a
Legal Aid chapter in your area, or from pro bono services of law firms in your area.

Do You Need A Lawyer To Start Your Nonprofit?

You Can Do Much of the Work Yourself -- But Get Legal Advice and Guidance.

You can do much of the work yourself to get incorporated and/or tax-exemption and/or tax-deductibility, but you should have some basic guidance and advice from a lawyer who understands nonprofit matters. For example, in the USA, it's very important how you characterize your plans when filing for incorporation with your state and/or for tax-exemption and/or tax-deductibility with the IRS -- otherwise, your new organization may be deemed a for-profit or you may have to pay federal taxes (among other taxes) on your income. In addition, there are various reports and filings you may have to submit. A nonprofit-knowledgeable lawyer can help you a great deal. Ask other nonprofits for references to good lawyers. Ask a local funder. Call the local bar association.The following link might also help you.

What Type of Nonprofit Should I Start ?

The phrase "starting a nonprofit" can mean several things. Read the following very basic information to begin thinking about what you mean when you set out to "start a nonprofit". Keep your mission statement in mind when thinking about each of the following. (There will be more specific guidance later on when you read the next subsection Variety of Checklists to Reference When Formalizing Your New Nonprofit.)

* You can be a nonprofit organization just by getting together with some friends, eg, to form a self-help group. In this case, youíre an informal nonprofit   organization.

* You can incorporate your nonprofit so it exists as a separate legal organization in order to a) own its own property and its own bank account; b) ensure   that the nonprofit can continue on its own (even after youíre gone); and c) protect yourself personally from liability from operations of the nonprofit.   You incorporate your nonprofit by filing articles of incorporation (or other charter documents) with the appropriate local state office. (An incorporated   nonprofit requires a board of directors.) In Canada, you can file for incorporation at the provincial or Federal levels.

* If you want your nonprofit (and if you think your nonprofit deserves) to be exempt from federal taxes (and maybe some other taxes, too), you should file   with the IRS to be a "tax-exempt" organization. (The IRS states that you must be a corporation, community chest, fund, or foundation to receive tax-exempt   status. Articles of association may also be used in place of incorporation.) (Probably the most well known type of nonprofit is a the IRS classification of   501(c)(3), a ìcharitable nonprofití.) (Being tax-exempt is not the same as being tax-deductible.) In Canada, you can file for tax-exemption at the   provincial and Federal levels.

* Depending on the nature of your organization, you may also granted tax-deductible status from the IRS. Publication 526 lists the types of organizations to   which donations are deductible. In Canada, the Canada Customs and Revenue Agency (CCRA) grants charitable status, and you must be incorporated to achieve   charitable status.

* So, for example, you could start a nonprofit that is incorporated, tax-exempt and eligible to receive tax deductible donations.

* The particular steps you take when starting your nonprofit depend on your plans for your organization, including the nature of its services. They also   depend on how the IRS interprets the nature of your organization, including its services. Again, in Canada, you can file for incorporation and tax-exempt   status at the provincial or Federal levels.

Checklist for Starting A New Nonprofit

1. Draft initial mission statement. 

Draft a brief mission statement that describes the purpose of the new
organization; your Board should approve it in their first official Board
meeting.

2. Recruit initial Board members.

If you plan to incorporate, recruit at least enough Board members to meet
state/province/federal requirements for a corporate Board; if you do not plan
to incorporate, consider an informal Advisory Board to help guide you.

3. Get a lawyer.

Lawyer can help file Articles (if you plan to incorporate) or you can do them
yourself. Apply for tax-exemption (if you plan to seek exemption from
certain taxes in USA). You can probably do the Articles yourself, but it is
helpful to get a lawyer to file for tax status.

4. Get banker and bank account.

Get a bank account; seek a bank that understands the needs of new, small
nonprofits. Get a reference from a similar nonprofit.

5. Get accountant.

Get an accountant or other finance expert to help you set up a basic
bookkeeping system for the nonprofit corporation. When you get a Board
Treasurer, he/she can be very helpful in this regard.

6. Get insurance agent.

You may need liability insurance, property insurance, and other insurance
when you hire staff, including Worker's Compensation, health and life
insurance benefits, etc. Get a reference from a similar nonprofit.

7. Draft Articles and get Board approval.

You will need to draft these only if you plan to file for incorporation with
your state/province/federal level; the Board should approve the Articles
before submission; the boilerplate / framework for the Articles is usually
provided by the government agency where you file.

8. Draft By Laws and get Board approval.

Some states/provinces/federal levels require these; the Board should approve
the By Laws. Get samples from a similar nonprofit.

9. File incorporation with state.

Submit your final, approved Articles; you may need to submit By Laws, too,
depending on your state/provincial/federal requirements.

10. Get government identification number - Federal Tax ID Number.

For example, in the USA, get a federal employer identification number. Do
this once you start to hire employees in order to withhold income and FICA.
Go to http://www.irs.ustreas.gov/ and search for ìForm SS-4î.

11. Conduct basic strategic planning.

Sketch out your mission statement, 5-8 goals that need to be achieved over
the next year, 4-5 objectives to achieve each goal, resources needed for each
method, and resulting budget of monies needed to achieve and support those
resources.

Steps Required To Form A Nonprofit Corporation

If you have not yet done so, you will probably need to attend to the following activities, depending
on the requirements of your state, or provincial, and federal government agencies.

1. Get the necessary government identification numbers.
   In the USA, file to get an employer identification number (EIN). You will need this number
   to file for tax exemption from the IRS. Go to http://www.irs.ustreas.gov/ and search for
   ìForm SS-4î. In Canada, when you file to be a charity, you will get a ìcharitable taxation
   numberî from the Canada Revenue Agency that you will need in order to administrate tax
   receipts activity with the government.

2. File for incorporation.


3. After you get designation that the nonprofit is a corporation, file for tax-exemption?
 The nature of this filing depends on the requirements of the government agency in your state
   or province, and at the federal level. For example, in the USA, you will file Form 1023 to
   the Internal Revenue Service (this is true at the time of this writing). You might need your
   Articles of Incorporation, employer identification number and a strategic plan. You might
   need your By Laws, as well. Ask the IRS to return a determination of your tax status and
   provide you a ìdetermination letter.î It might take up to six months to get this letter.
   During this period, you can conduct operations including solicitations from funders. Tell
   other organizations that you have filed for exemption. When you get your letter of determination
   from the IRS, keep this form! You will need it to show funders that you are tax-exempt and/or tax-deductible.

4. Once you get tax exemption, file for any state, province and property tax exemptions.
   The nature of this filing depends on the requirements of the government agency in your state
   or province and at the federal level.

5. Get a bulk mail permit.
   This will come in handy when you do bulk mailings to clients, funders, etc. Contact your
   local post office to see if the nonprofit qualifies for this permit or other discounts.