Starting a Nonprofit
On this page:
- Starting Places
- Fiscal Sponsors
- Pros & Cons of Forming a Nonprofit
- Boards & Management
- Articles of Incorporation
- 501(c)(3)-IRS Determination
- Annual Report
- Strategic Plan
- Record Keeping System
- Accounting System
- Charitable Solicitation Law
- Unemployment Insurance
- Nonprofit Mailing Permit
- Liability Insurance
Good starting places for finding information on forming nonprofit, tax-exempt organizations:
- Free Online Training Webinars
Foundation Center's Webinar Series for Nonprofit Startup Organizations This webinar series guides you through the necessary steps to help you start off on solid footing and to learn to build an effective organization.
Before You Seek a Grant: A Checklist for New Nonprofits This course is geared towards representatives of community groups without nonprofit status or new nonprofits with very little experience in grantseeking in general. This webinar last 60 minutes and is free.
- ASU Lodestar Center for Philanthropy & Nonprofit Innovation
- Foundation Center: How do I establish a nonprofit organization?
- Nonprofit Good Practice Guide from the Dorothy A. Johnson Center for Philanthropy & Nonprofit Leadership
- Society for Nonprofit Organizations
- Nonprofit Startup Resources in Arizona
- Browse the 346.73064 call number area at the library and the following subject headings for books.
Decide if there is a need to become a nonprofit organization. Should you collaborate or partner with an existing nonprofit whose mission is similar to yours?
Or would you be better served to work under the umbrella of another organization with tax-exempt status? Fiscal Sponsorship is a system by which a legally recognized 501(c)(3) public charity provides sponsorship for a project that does not have its own 501(c)(3) status, thereby enabling that project to solicit and receive grants and tax-deductible contributions.
Discover more about fiscal sponsorship from their GrantSpace page.
See the book Fiscal sponsorship: 6 Ways to Do It Right
Pros & Cons of Forming a Nonprofit
- Eligible to apply for government and foundation grants.
- Donors can receive tax deductions for gifts to 501(c)(3) organizations.
- Can set up bulk mail permit (minimum 200 pieces) at reduced rates.
- Exempt from paying federal income tax.
- Considerable amount of red tape and organizational paperwork; requirement to establish and maintain board of directors; report annually to state and federal government.
- Incorporation involves spending money. See the Arizona Corporation Commission for current fees. Also see the section below on Articles of Incorporation.
- Obtaining tax-exempt status from the federal government involves additional fees. See the section below on 501(c)(3)-IRS Determination
- Consider that there will likely be attorney's fees, unless you are able to find an attorney to help you free of charge. See the section below on Attorney
- Requires time, energy, and know-how to file for tax-exempt status, set up books, bank accounts, work with board of directors, etc.
- Must rely on public and private financial support which takes effort and may not always be forthcoming.
Boards & Management
Determine the purpose of the organization, form a board of directors, and elect officers. The purpose should include a short mission statement that stresses the need that will be met and the audience to be served by your organization. See links for Boards & Management.
Get an attorney.
Although there is no legal requirement to use an attorney or tax professional, it is recommended that you use one to review your documents. If you have tightly drawn documents to give an attorney where few changes would be expected, ask a lawyer friendly to your cause to do it pro bono (free) or at reduced cost.
If you live in southern Arizona your organization may qualify for free legal assistance from the Southern Arizona Legal Aid. Call 623-9465 for details.
You can also contact the Arizona Foundation for Legal Services and Education.
See the Foundation Center's FAQ Where can I find "pro-bono" legal assistance for my nonprofit organization?
You may have to pay a lawyer for this service.
Articles of Incorporation
Write articles of incorporation. Contact the Arizona Corporation Commission also see:
- Sample Articles of Incorporation
- Articles of Incorporation for a Not For Profit Organization
- The Foundation Center's FAQ Where can I find examples of articles of incorporation for nonprofits?
Submit articles for approval to the Arizona Corporation Commission. Check with them for the current fee.
For samples of bylaws see books in the 346.73064 call number or search the catalog using the subject Nonprofit organizations - Law and legislation - United States - Popular works
- Also see the following:
- The Foundation Center's FAQ Where can I find examples of nonprofit bylaws?
- By-Laws of Not-For-Profit Corporation Form
After your articles of incorporation have been approved and filed with the Arizona Corporation Commission, publish your articles of incorporation in an established newspaper in Pima County. Additional information at the Arizona Corporation Commission.
After becoming an Arizona nonprofit corporation, file for an IRS determination of federal tax-exempt status. Nonprofit corporations with charitable, educational, scientific, religious, or cultural purposes have tax-exempt status under section 501(c)(3)- or sometimes section 501(c)(4)- of the Internal Revenue Code. Read Applying for 501(c)(3) Status (PDF).
Learn why to apply for 501(c)(3) status, who is eligible, what responsibilities accompany 501(c)(3) status, and how to apply. More information on the web:
- IRS Tax Info for Charities and Nonprofits includes publications and forms you will need.
- IRS Life Cycle of a Public Charity provides an easy-to-use way of linking to the IRS documents most charities will need.
- Idealist.org explains what sorts of organizations are exempt from federal income taxes?
The application is an important legal document, so it is advisable to seek the assistance of an experienced attorney when preparing it. Allow a minimum of nine to twelve months to get incorporated and obtain tax-exempt status. There is an application fee that varies and is based on your organization's annual gross receipts.
The Arizona Corporation Commission and the IRS require that you file annual reports. View the Arizona Corporation Commission Annual Report Instruction Sheet.
The National Center for Nonprofit Boards also advises that new nonprofit organizations prepare the following:
Charitable Solicitation Law
If using a contracted fund raiser (a person who for profit solicits directly or employs another person to solicit for your nonprofit organization), the fund raiser must register with and report to the Arizona Secretary of State's office and meet the requirements of the Arizona charitable solicitation law. For more information contact the Arizona Secretary of State's Office.
Register with the state unemployment insurance bureau. Information is available from the Arizona Department of Economic Security. See their Frequently Asked Questions About Arizona Unemployment Insurance Tax.
Nonprofit Mailing Permit
Apply for a nonprofit mailing permit from the US Postal Service. See the Web site of the National Alliance for Nonprofit Mailers for information.
Obtain directors and officers liability insurance. D & O Insurance is professional liability coverage for legal expenses and liability to shareholders, bondholders, creditors or others due to actions or omissions by a director or officer of a corporation or nonprofit organization. See Insurance Against Liability for more information.
The information provided by the Pima County Public Library is not intended to substitute for legal or professional advice.