Choose a Name for Your Nonprofit
The first step in forming a nonprofit is choosing a unique and appropriate name. Under New Jersey law, the name must be distinguishable from other registered entities. You can check the availability of your desired name by searching the New Jersey Division of Revenue and Enterprise Services database.
- The name must include corporation, incorporated, company, or an abbreviation like Inc.
- Make sure the name aligns with your organization’s mission and purpose.
Draft Your Mission Statement
Your nonprofit’s mission statement should clearly define the organization’s goals, purpose, and the community or group it aims to serve. A strong mission statement will guide your activities and help attract donors, volunteers, and members.
Incorporate Your Nonprofit
To create a legal entity, you must file Articles of Incorporation with the New Jersey Division of Revenue. This document establishes your nonprofit as a legal entity and must include:
- The name of the corporation
- The corporation’s purpose (which must align with a charitable, educational, or religious cause)
- The address of the nonprofit
- The names and addresses of the incorporators (the people forming the organization)
The filing fee for incorporation is $75.
Appoint a Board of Directors
New Jersey law requires that your nonprofit has a board of directors, which oversees the organization’s activities. The board must consist of at least three directors who are not related to each other. The board’s primary responsibilities include:
- Setting policy and direction for the nonprofit
- Ensuring the nonprofit adheres to its mission
- Overseeing financial decisions and compliance
Create Bylaws
Your nonprofit’s bylaws serve as the governing rules for how the organization operates. The bylaws should cover:
- How the board of directors is elected and how long they serve
- How meetings are conducted
- The roles and responsibilities of officers and board members
- Procedures for decision-making and voting
The board of directors must approve the bylaws during the organization’s first official meeting.
Obtain an Employer Identification Number (EIN)
Your nonprofit needs an Employer Identification Number (EIN) to open bank accounts, hire employees, and file taxes. You can apply for an EIN through the IRS website for free. Even if you don’t plan to hire employees immediately, having an EIN is required for most financial transactions.
Register for Tax Exemption
To gain federal tax-exempt status, you must file Form 1023 or Form 1023-EZ with the IRS to apply for 501(c)(3) status. This designation exempts your nonprofit from federal income taxes and allows donors to deduct contributions.
- Form 1023-EZ is a simplified version for smaller nonprofits with projected annual revenues of less than $50,000.
- Form 1023 is more comprehensive and applies to larger organizations.
Once approved, your nonprofit will receive a Letter of Determination from the IRS, confirming its 501(c)(3) status.
Register for State Tax Exemptions
After receiving federal tax-exempt status, you can apply for state tax exemptions with the New Jersey Division of Taxation. This process allows your nonprofit to avoid state corporate income taxes and sales tax on certain purchases.
- File Form REG-1E to register for state tax exemptions.
Register as a Charity
If your nonprofit plans to solicit donations, you’ll need to register as a charity with the New Jersey Division of Consumer Affairs, Charitable Registration Section. This registration ensures transparency in fundraising and is required if you raise more than $10,000 annually.
Comply with Ongoing Reporting and Filing Requirements
Once your nonprofit is established, you’ll need to comply with ongoing reporting requirements to maintain your legal status. This includes:
- Annual Reports: File an annual report with the New Jersey Division of Revenue and Enterprise Services to update your organization’s information.
- IRS Form 990: File Form 990 annually with the IRS to report your organization’s finances and activities. Smaller nonprofits may qualify for the simpler Form 990-N (e-Postcard).
- Charity Renewal: If registered as a charity, you must renew your charitable registration annually.
Conclusion
Starting a nonprofit in New Jersey involves a series of legal steps to ensure compliance with state and federal regulations. From incorporating your organization to securing tax-exempt status and registering as a charity, following these steps will set the foundation for your nonprofit to succeed. By understanding and fulfilling these legal requirements, you’ll be able to focus on your nonprofit’s mission and make a positive impact in your community.