Most nonprofits are 501(c)(3) corporations, which means they are formed for religious, charitable, scientific, literary, or educational purposes and are eligible for federal and state tax exemptions. To create a 501(c)(3) tax-exempt organization in New York, first you need to form a New York nonprofit corporation by filing a certificate of incorporation, and then you then apply for tax-exempt status from the IRS and the State of New York. Here are the details.
1. Choose who will be on the founding board of directors for your nonprofit corporation.
In New York, a nonprofit corporation needs to have three or more directors on its board of directors.
2. Choose a name for your New York nonprofit corporation.
The name of your nonprofit corporation cannot be the same as the name of another nonprofit corporation on file with the New York Department of State. To see if your proposed name is available, you must send a written request to the Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. Your letter should state that you wish to determine the availability of a name and include the name or names to be searched. For more information, see the NYS Division of Corporations website.
In New York, your nonprofit corporation name must contain the word "corporation," "incorporated," "limited," or an abbreviation, unless the corporation is formed for charitable or religious purposes. Your corporation name may not contain any words prohibited by New York statutes, including the following: "acceptance," "annuity," "assurance," "bank," "bond," "casualty," "doctor," "endowment," "fidelity," "finance," "guaranty," "indemnity," "insurance," "investment," "lawyer" "loan," "mortgage," "savings," "state police," "state trooper," "surety," "title," "trust," or "underwriter."
You can reserve a name for your corporation for 60 days by filing an Application for Reservation of Name with the NYS Division of Corporations.
3. Prepare and file your nonprofit certificate of incorporation.
You will need to create and file a nonprofit certificate of incorporation with the New York Department of State. The certificate of incorporation needs to include basic information such as your nonprofit's name, your nonprofit's statement of purpose, certain provisions required for state and federal tax-exempt purposes, and the name and address of your registered agent (the person to whom legal notices should be sent).
To form your corporation, file your certificate of incorporation with the New York Department of State. Check the Department of State, Division of Corporations website for filing fees and other important information. The website has a sample nonprofit certificate of incorporation form which meets the minimum filing requirements for New York. To ensure that you'll receive 501(c)(3) tax-exempt status when you apply with the IRS, you'll need to include this specific language, such as a clause dedicating the nonprofit's assets to another 501(c)(3) nonprofit organization should your nonprofit end. For additional help, consult a legal self-help guide such as How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo), to make sure your certificate complies with New York's nonprofit laws.
4. Prepare bylaws for your New York nonprofit corporation.
You'll need to prepare bylaws that comply with New York law and contain the rules and procedures your corporation will follow for holding meetings, electing officers and directors, and taking care of other corporate formalities required in New York. For more information, see Nolo's article Nonprofit Formation Documents: Articles of Incorporation, Bylaws, and Organizational Minutes, or, for help creating your bylaws, see Nolo's book How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo). Your bylaws do not need to be filed with the New York Department of State -- they are your internal operating manual.
5. Hold a meeting of your board of directors.
Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:
- approving the bylaws
- appointing officers
- setting an accounting period and tax year, and
- approving initial transactions of the corporation, such as the opening of a corporate bank account.
After the meeting is completed, minutes of the meeting should be created.
6. Set up a corporate records binder.
You should set up a corporate records binder for your nonprofit to hold important document such as your certificate of incorporation, bylaws, and minutes of meetings. For more information, as well as minutes forms, consent forms, and other resolutions, see Nonprofit Meetings, Minutes & Records, by Anthony Mancuso (Nolo).
Now that you have created your nonprofit corporation, you can obtain your federal and New York state tax exemptions. Here are the three steps you must take to obtain your tax-exempt status:
1. File your Form 1023 federal tax exemption application
It makes sense to apply for your federal tax exemption before your New York tax exemption. To obtain federal tax-exempt status, you need to complete and file IRS Form 1023 with the IRS. This long and detailed form asks for lots of information about your organization, including its history, finances, organizational structure, governance policies, operations, activities, and more. For more information, see Nolo's article How to Obtain 501(c)(3) Tax-Exempt Status for Your Nonprofit, or for line-by-line instruction on how to complete the form, see How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
2. Obtain your New York state tax exemption
Once you have your federal tax exemption, you need to obtain your New York state tax exemption. This may include exemptions from income, property, sales, and other state taxes. New York State's Department of Taxation and Finance will have a form you need to file to obtain your state tax exemption.
3. Other state reporting and registration requirements
Depending on your activities and the size of your organization, you may need to register with the New York attorney general before doing any fundraising activities. Check with the New York attorney general's website at www.CharitiesNYS.com for additional rules, or for more information about fundraising registration requirements, see Nonprofit Fundraising Registration: The 50-State Guide, by Stephen Fishman (Nolo).
That's it! That's all it takes to become a Section 501(c)(3) tax-exempt nonprofit corporation in New York.
Last updated on 5/1/2013