There are various ways to help and give back to communities. One of these is by establishing a nonprofit organization. Nonprofits are known to advocate or further a cause without trying to generate profit. For some people, starting an organization that is a nonprofit can be a rewarding and exciting journey. However, the whole ordeal can also be challenging. But this must be done to make sure the operations are legal. To do this, one must register it with the state.
Starting an Organization in Indiana
Before forming a nonprofit in Indiana, you have to understand the requirements of the state. That means knowing the paperwork it involves and the steps that need to be followed.
One of the first things to know is the 501(c)(3) corporation status. Generally, a lot of nonprofits fall under this category. That is especially true for those that were created for charitable, educational, literary, religious, and scientific purposes. Obtaining this status makes the company eligible for federal and state tax exemptions. It also limited the liability of the officers and directors of the organization. Additionally, it helps build credibility and prove the legitimacy of the organization.
However, to apply for 501(c)(3), you have to form a corporation first. After successfully registering the entity with the state of Indiana, apply for tax-exempt status with the Internal Revenue Service (IRS). The incorporators of the company should also submit an Application for Recognition of Exemption form to the IRS.
What To Do
The first step to take is to evaluate the business idea. Find out if the organization that you want to form can address the needs of the target community. It is also best to check if there is no existing organization providing the service that you plan to offer. This way, it prevents the reduction of the impact of the cause. Doing this will also help create ways to properly use the available resources.
Keep in mind that starting an organization is not a walk in the park. It may require setting aside a lot of time to handle multiple responsibilities. So, choose a cause that is a passion and ensure that you are dedicated enough to achieve all goals.
Additionally, each state has laws that govern organizations. Make sure to be familiar with them to avoid any legal issues. Here are some of the things that need to be taken care of to form a nonprofit organization in Indiana:
- Name of the Organization – The name of the corporation has to reflect the mission that you have in mind. The name should be something that is memorable to the public. Aside from this, ensure its distinguishability. The state will not allow a company to use a name if another entity has already taken it. Conduct a name search to find out if the desired name is still available.Indiana also has naming guidelines that must be followed. Using a proper designator is also required. This can include the word Corporation, Incorporated, Company, Limited, or any of their abbreviations.
- Incorporators and Initial Directors – The organization needs to have at least one incorporator, who will be signing the formation documents. The organization will also need at least 3 initial directors. They will make up the governing body of the nonprofit. They will also be the stakeholders. Based on IRS requirements, the directors should be unrelated individuals. Indiana does not have any residency requirements. The default term of directors is a year, while the maximum or 5 years.
- Registered Agent – All entities operating in Indiana have to designate a registered agent, who agrees to receive all legal notices on behalf of the organization. Indiana requires a registered agent to be chosen who will maintain an office during regular business hours in a physical address located in the state. They can be a nominated individual, who is at least 18 years old, or a third-party organization like DoMYLLC that is authorized to transact in Indiana.
- Articles of Incorporation – The organization will have to file NonProfit Articles of Incorporation to formally register the organization with the state. Doing this will provide legal protection. The paperwork must be submitted to the Secretary of State, along with the filing fee. If you choose to mail or hand-deliver the documents, the fee will be $50. Meanwhile, online submissions cost a $30 filing fee and a $1 credit card processing fee. The Secretary of State typically takes around a week to process mailed and hand-delivered documents. Processing of online filings usually takes around 24 hours or less.
- You have to take note of the provisions that the IRS look for when it comes to 501(c)(3) application. Include the following:
- Purpose statement that meets the IRS requirements
- Statements that the nonprofit will not engage in activities related to exempted purposes or will not take part in prohibited political and legislative activities
- A dissolution clause, which specifies that the corporation’s assets will be dedicated to another 501(c)(3) organization or the government if it dissolves
- Bylaws – When starting an organization there needs to be governing documents. These are called bylaws. These will be the operating manual of the organization. Include guidelines on certain activities, including meeting, the election of officers and directors, the rights and responsibilities of members and officers, and other corporate formalities.Additionally, the nonprofit will also need a conflict of interest policy to prevent personal interests from affecting the organization. The IRS requires approved and adopted bylaws and conflict of interest policy for the 501(c)(3) exemption.
- Organizational Meeting – The organization has to conduct an initial organizational meeting attended by the board of directors. During this meeting, the directors will approve and adopt the bylaws and conflict of interest policy, appoint officers, set an accounting period and tax year, and approve certain resolutions. You have to make sure to record the minutes of the meeting.
- Employer Identification Number (EIN) – Be sure to get an EIN from the IRS. It is the unique nine-digit number that will identify the organization and serve as a social security number. It will also be needed when applying for 501(c)(3) status. Additionally, it is necessary in opening a bank account in the name of the organization. The application for an EIN is free and can be done online.
- State Tax Registration – If the organization will take part in taxable business activities like selling products or hiring and paying employees, then the organization may have to register with the Department of Revenue. You will also need to register if you plan on requesting sales tax exemptions for individual fundraising activities.The state has a consolidated tax registration. Use the Business Tax Application form and file for free. If there is a request for a sales tax license, there is a $25 fee to pay. The Department of Revenue will send an email on the status of the corporation’s application within 48 to 72 hours. If there are no issues, the organization will receive a taxpayer identification number.
- Licenses and Permits – Depending on the activities of the organization, the company may have to obtain business licenses and permits. Indiana does not have a statewide business license, so you will have to check with the county and city clerks’ offices.
- Biennial Report – All nonprofits in Indiana have to file a business entity report every two years to the Secretary of State. This document will update the information that was submitted to the state. It comes with a $20 fee.
Starting an organization to support or further a cause is a noble pursuit. However, there is a process to ensure that your operations are legal. Additionally, state registration will help the business get private and public grants. It will also allow the company to qualify for certain tax exemptions.
If you think that the whole ordeal is a bit overwhelming or time-consuming, then the best option is to hire the services of a reliable third-party organization like DoMyLLC. Contact us now to find out how our team of experts can help.
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