People involved with charitable causes may have considered organizing a nonprofit at some point. While formalizing the organization may require additional work and responsibilities, it can open new opportunities that informal organizations cannot offer.
What It Is
Generally, a non-profit is an organization serving the public in some way. They take any profits they receive, whether from donations, sponsorships, goods, or services, and cycle them back to achieve their mission.
In most cases, these organizations serve certain communities or are formed around a specific social cause like disease research, humanitarian aid, and the likes.
Before learning the process of forming a non-profit in Rhode Island, it is important to understand how formally incorporating the organization can help. Here are some of the advantages that it offers:
- Incorporating a non-profit will protect the owners’ personal assets from possible lawsuits and creditor claims. Additionally, it will also protect the organization’s trustees, officers, and volunteers.
- A Rhode Island non-profit is usually exempt from federal income taxes related to exempted purposes.
- Non-profits in Rhode Island can apply for exemption from state income taxes and sales and use taxes.
- Formally registering a non-profit in the state allows it access to possible grant money, both public and private.
Starting a Non-Profit Corporation
According to state laws, non-profit corporations have to register with the Department of State. This registration is separate from the application for tax exemption with the Internal Revenue Service (IRS).
Here is a simple step-by-step guide on how to incorporate a non-profit in Rhode Island to help organizations get started:
Step 1: Choose an appropriate name for the organization.
The name of the organization is important in establishing its brand. After all, it is the first thing that most people will probably encounter. So, make sure to pick a name that aligns with the organization’s mission.
However, it is also necessary to abide by the naming regulations of the state. In Rhode Island, non-profits cannot use a name that implies that it was formed for any other purpose than what is stated in the Articles of Incorporation.
Additionally, it should also be distinguishable. That means that a non-profit corporation can not use a name if another entity in the state has already registered or reserved it. To prevent any issues, it is advisable to verify the availability of the organization’s name through a business entity search on the database of the Department of State.
In case the non-profit already has a name in mind but is not yet ready to register with the state, it has the option to reserve a name. Submit a completed Application for Reservation of Entity Name form to the Business Services Division of the Department of State and pay the $20 filing fee. Doing this will reserve the name for 120 days upon filing.
Step 2: Nominate a registered agent.
Rhode Island non-profits are required to appoint and maintain a registered agent in the state. The agent will serve as the point of contact between the organization and the state. They will accept all legal mail and government correspondence on behalf of the non-profit.
So, who can be a registered agent?
Rhode Island allows the appointment of either an individual or an entity as long as they comply with the qualifications set by the state.
Individual registered agents should:
- be at least 18 years old,
- be a resident of Rhode Island,
- have a physicals street address in the state,
- be present at the listed address during regular business hours, and
- agree to be the registered agent of the non-profit corporation.
Commercial registered agents should:
- have a physical presence and street address in the state,
- be present at the said address during regular business hours, and
- consent to the appointment as a registered agent.
Step 3: Select the members of the Board of Directors and officers.
A non-profit should have directors who will be overseeing the organization’s operations. These directors will also form the board.
There should also be officers like a president and a secretary. These are individuals who are responsible and authorized to execute certain decisions based on job descriptions.
The state requires a non-profit to have an organizational structure that includes the following:
- at least 3 directors who are not related to each other,
- a president,
- a secretary, and
- a treasurer.
Step 4: File the Articles of Incorporation.
To formally register the non-profit, it should submit the completed Articles of Incorporation to the Department of State. It comes with a $35 filing fee.
When filling out the form, an organization should disclose the following pieces of information:
- Organization name
- Duration of the corporation
- Name and address of the registered agent
- A list of the initial directors
- The incorporator/s
- Effective date
- Contact information
Step 5: Draft the bylaws and Conflict of Interest Policy.
These documents are important in running a Rhode Island non-profit. The bylaws will set the rules that will determine how to run and govern the organization.
On the other hand, the Conflict of Interest Policy is the rules that will make sure that all decisions for the organization are based on what is best for the non-profit and that they are not motivated by personal interests.
Step 6: Conduct the first official meeting.
The non-profit should conduct its first official meeting, which is known as the organizational meeting. It is when the temporary officers will be appointed. The meeting will also be for the adoption of the bylaws and Conflict of Interest Policy. It is crucial to take attendance to prove that there was a quorum. The non-profit should also record and keep minutes of the meeting signed by all directors who attended.
Step 7: Obtain an Employer Identification Number (EIN).
The EIN is necessary to identify a business entity. It works like a social security number. It will be used for federal tax filing purposes, hiring employees, and opening a bank account under the name of the organization.
Step 8: Get a state tax identification number.
A non-profit should also get a State Taxpayer Identification Number from the Division of Taxation. Submit a Business Application and Registration form.
Step 9: Apply for tax exemption.
Some non-profits are eligible for 501(c)(3) status. These will be exempted from paying federal income taxes. However, their purpose to one or more of the following:
- Fostering national or international amateur sports competition
- Preventing cruelty to animals and/or children
- Testing for public safety
A non-profit should also accomplish the following before proceeding to the application for 501(c)(3) status:
- Elect at least 3 initial directors who are not related to each other.
- Register as a non-profit corporation with the Rhode Island Department of State.
- Adopt bylaws and a Conflict of Interest Policy.
- Get an EIN.
After fulfilling all of these tasks, the organization can proceed to its application for 501(c)(3) status by filing IRS Form 1023 Application for Recognition of Exemption. The agency will send a determination letter to inform the organization that its application has been approved.
As for state taxes, a non-profit may qualify for sales and use tax exemption in Rhode Island as long as it is any of the following types of organizations:
- Accredited educational institutions
- Non-profit hospitals
- Non-profit interest-free loan associations
- Non-profit organized sporting leagues
- Non-profit senior citizen clubs
- Parent-Teacher Associations
- Other organizations with 501(c)(3) status
Organizations that want to dedicate their time and effort to certain communities or to further a specific cause may be thinking of forming a Rhode Island non-profit. While doing this may require the completion of a multi-step state process, it will also offer many advantages like protecting personal assets.
For some people, the registration process in Rhode Island may seem a bit overwhelming. There will be multiple tasks and requirements. Fortunately, there are third-party organizations like DoMyLLC that can help.
Our team of experts can assist organizations in preparing and filing the necessary paperwork. We can also serve as a registered agent as we are authorized to be one in Rhode Island. Additionally, our clients can request a personalized solution to ensure that our service fits their specific circumstances and needs. Contact us to find out how.
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