Considering starting a nonprofit in North Carolina? The most effective startup founders and boards follow these steps to establish their nonprofits.
Nonprofits are a vital part of our society, providing services that benefit people and their communities. There are many types of nonprofits, including religious organizations, civic leagues, and federal credit unions.
Starting a nonprofit requires following specific steps to meet legal obligations and earn tax-exempt status. From learning how to raise money for a nonprofit to recruiting a board of directors, follow this step-by-step guide to learn how to start a nonprofit in North Carolina.
1. Name Your Organization
The first step is to decide on an appropriate name for your nonprofit. Go for something memorable that reflects your organization’s mission. The name must meet these legal requirements:
- Name cannot contain language stating or implying that the entity is organized for any purpose other than a purpose that is lawful and that is permitted by its formation documents
- Name must be distinguishable upon the records of the Secretary of State from the name of any other entity on the business registry.
- Name cannot contain words considered offensive to accepted standards of decency
Once you decide on a name, conduct a name search with the North Carolina Secretary of State – Business Registration Division to ensure the name isn’t already taken by another organization. Also, check the feasibility of the name.
2. Recruit a Board of Directors
Now that you’ve decided on a name for your nonprofit, it’s time to think about recruiting board members. A North Carolina nonprofit is required to have at least three directors who are not related to each other. A good board of directors makes all the difference in running a successful nonprofit. Here are some tips to consider when choosing board members:
- Identify what your organization needs in a director, whether that’s industry knowledge, connections, or fundraising experience
- Look for diversity in backgrounds and skills
- Avoid conflicts of interest, such as selecting board members who have financial interests related to your nonprofit
3. File Articles of Incorporation
Once you have recruited a board of directors, you’re ready to file articles of incorporation. This registers your organization with the Secretary of State’s Office. In North Carolina, the articles of incorporation for a nonprofit must include:
- Statement indicating if the nonprofit corporation is a charitable or religious corporation
- Name and address of registered agent and address of corporation’s registered office
- Name and address of each incorporator
- Signature of at least one incorporator
- Statement indicating if the nonprofit corporation will have members.
- Provisions regarding the distribution of assets upon dissolution of the nonprofit corporation
To file your articles of incorporation in North Carolina, download and fill out Form N-01. Submit it to the Secretary of State by mail or in-person with a $60 filing fee.
4. Obtain Employer Identification Number
Your nonprofit corporation is legally required to obtain a federal employer identification number (EIN). This unique, nine-digit number is required for all types of nonprofits. With the EIN, you’ll be able to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.
To obtain an EIN, fill out the IRS Form SS-4 via mail, phone, fax, or online.
5. Establish Governing Documents and Policies
Every nonprofit needs rules that outline how it is governed. Board bylaws lay out governance rules and policies. Bylaws guide directors’ decision-making processes. The following are the key components included:
- Responsibilities and powers of directors
- Organization’s purpose statement
- Board structure, including how the board is organized and term limits
- Voting rules, including how many members must be available for voting to occur
- Amending bylaws procedures
- Conflict of interest policy
It’s ideal to hire a competent nonprofit attorney before finalizing your bylaws. Doing so ensures all essential provisions are included and written for the organization’s best interests. While North Carolina doesn’t require organizations to file their bylaws with the Secretary of State, a copy of the bylaws is required by the IRS when seeking tax exemption as a 501(c)(3) organization.
6. Apply for North Carolina Tax Exemption(s)
Your nonprofit may be eligible for tax-exempt status under Section 501(c)(3), which allows nonprofits to receive tax breaks. To obtain this status, you must complete and submit an application form to the North Carolina Department of Revenue. If you are denied tax-exempt status, you may appeal the decision. For more information about applying for tax-exempt status, consult this comprehensive guide on the 501(c)(3) application process.
Effective Boards Rely on OnBoard
A nonprofit’s success highly depends on the board’s effectiveness. The board of directors must work together to achieve the organization’s goals.
A world-class board management and governance system helps ensure all aspects of your nonprofit run smoothly. OnBoard is a simple and effective tool purpose-built to assist nonprofit boards in managing their day-to-day activities, from board meetings to follow-up tasks.
Good boardwork starts with focused meetings. Download our free board meeting agenda template to easily create an agenda focused on conducting a productive meeting.
About The Author
- Jillian Walker is a customer success manager who specializes in helping nonprofit organizations get the most from their board meetings. She's also the founder of the Indianapolis-based non-profit TraceIndy, which is dedicated to connecting professional women across communities
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