Starting a nonprofit in Maryland? You'll need to complete these key steps, including recruiting a board of directors, registered agent, and more.
Running a nonprofit organization provides a fantastic opportunity to look beyond revenue in service of humanity. Starting a nonprofit in Maryland requires several steps, including learning how to raise money for a nonprofit and recruiting a board of directors.
The following article provides additional information on nonprofits and explains how Maryland residents can launch a nonprofit.
What is a Nonprofit?
According to Investopedia, “A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit. Donations made to a nonprofit organization are typically tax-deductible to individuals and businesses that make them, and the nonprofit itself pays no tax on the received donations or on any other money earned through fundraising activities. Nonprofit organizations are sometimes called NPOs or 501(c)(3) organizations based on the section of the tax code that permits them to operate.”
Why Consider Starting a Nonprofit?
Organizers form nonprofits for various purposes. For example, a nonprofit organization may support one of the following categories:
Hospitals and clinics
Legal Aid Societies
Considerations When Starting a Nonprofit
As you prepare to start a nonprofit in Maryland, consider the following questions:
What’s your mission?
What’s your budget?
How much will it cost to do the nonprofit work?
How will you raise awareness?
Who can fund the nonprofit?
Who do you need to recruit to manage the nonprofit?
How will you stay compliant?
You will also need to learn how to raise money for a nonprofit to keep the organization running swiftly. Nonprofits typically fundraise through calls, emails, social media platforms, charity auctions, or online events.
Steps to Start a Nonprofit in Maryland
The following are the initial steps to starting a nonprofit organization under Maryland state law:
1. Name Your Organization
The first step to establishing a nonprofit involves choosing a name. Pick a name connected to your cause that will resonate with potential donors, volunteers, and other stakeholders. It’s also important to consider the type of message you want to convey through your nonprofit name.
You can confirm the name isn’t already used by another organization by searching the state’s business entity database.
2. Recruit a Board of Directors
Maryland requires at least three officers who are not related to each other (President, Secretary, and Treasurer) and a minimum of five members of the board of directors. In the state of Maryland, the board must include at least three directors who are unrelated to each other. Maryland requires the following board positions: president, secretary, and treasurer. These directors serve as the board officers. Maryland’s best practices suggest including at least five board members, including the three officers.
3. Appoint a Registered Agent
Nonprofit organizations in Maryland must appoint a registered agent. A registered agent handles the legal matters of the nonprofit, such as accepting subpoenas and receiving tax and legal documents on behalf of the nonprofit. This is also a good time to appoint the nonprofit treasurer, who will be responsible for overseeing all aspects of the nonprofit’s finances.
4. Obtain Employer Identification Number (EIN)
Every nonprofit organization must apply for a federal Employer Identification Number (EIN). Similar to a Social Security Number, the Employer Identification Number (EIN) is a nine-digit number assigned by the IRS that acts as a numerical identifier for your nonprofit. This number becomes permanently attributed with your nonprofit throughout its life span. To apply for an EIN, fill out form SS-4.
5. File Form 1023 for Federal Tax Exemption
Nonprofit organizations may apply for federal tax exemption as an IRC Section 501(c)(3) organization by filing IRS Form 1023. To file for an exemption, organizations must complete the following steps:
6. Hold Nonprofit Board Meetings
Nonprofits hold board meetings to further their mission, adopt bylaws of incorporation, as well as provide guidance on the overall structure of the organization. The nonprofit board’s bylaws will state the number and frequency of meetings.
Understanding the Board of Directors' Role in a Nonprofit
What Is the Role of the Board of Directors in a Nonprofit?
The board of directors oversees the activities of the organization, ranging from its finances to adopting the nonprofit’s mission to hiring executive directors and providing guidance on the organization’s structure.
The board of directors must provide:
A duty of care
A duty of loyalty
Duty of obedience to the nonprofit organization’s mission and goals
What Does the Board of Directors Help the Nonprofit Do?
The board of directors helps the nonprofit in the following activities:
Hires for key positions, including the executive director
Recruits and trains new board members
Follows legal rules and regulations
Is it a Good Idea to Appoint Board Members Sooner Rather than Later?
The first board meeting should be held within 30 days of the nonprofit’s incorporation. Good practice indicates the organization should hold its first board meeting as soon as possible to accomplish these vital decisions:
Appoint the first directors and officers
Adopt the bylaws and articles of incorporation
Select a financial partner
Address funding issues
Help the organization set goals
Getting Started with OnBoard
OnBoard’s nonprofit board management solution helps Maryland nonprofits manage their operations as smoothly as possible. The platform ensures nonprofit meetings become more productive by supporting real-time collaboration, facilitating virtual meetings, managing meeting minutes, and automating administrative tasks.
Additionally, OnBoard reduces the risk of non-compliance with federal and state rules, and makes it easy for board members and staff to collaborate and work together virtually.
For assistance on running a successful meeting and to track follow-ups, check out OnBoard’s free board meeting minutes template.
Frequently Asked Questions
How Much Does it Cost to Start a Nonprofit Organization in Maryland?
The incorporation of a nonprofit in Maryland requires $150 for the filing fee plus $20 for the organization and capitalization fee. In addition, nonprofit organizations applying as 501(c)(3), (4), or (6) must pay a $50 development center fee.
Do Nonprofits Need a Business License in Maryland?
Maryland does not require nonprofit organizations to obtain a business license. The state requires that the IRS certifies the nonprofit organization’s tax-exempt status.
How Many Board Members are Required for a Nonprofit in Maryland?
Maryland requires at least three officers (President, Secretary, and Treasurer) and a minimum of five members of the board of directors.
About The Author
- Gina Guy is an implementation consultant who specializes in working with nonprofit organizations get the most from their board meetings. She loves helping customers ease their workloads through their use of OnBoard. A Purdue University graduate, Gina enjoys refinishing furniture, running, kayaking, and traveling in her spare time. She lives in Monticello, Indiana, with her husband.
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