Most nonprofits are 501(c)(3) organizations, 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, first you need to form a Washington nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Washington. Here are the details.
Form Your Washington Nonprofit Corporation
To form a nonprofit in Washington, first you need to form a nonprofit corporation under Washington state law (Chapter 24.03 of the Revised Code of Washington “RCW”). See the Washington Nonprofit Handbook for helpful information.
1. Choose the initial directors for your corporation
In Washington, you must have one or more directors on your board.
2. Choose a name for your Washington nonprofit corporation
The name of your nonprofit corporation be the same as or deceptively similar to an existing or reserved corporate name or limited liability company name. It cannot include or end with any of the following words or abbreviations of such words: corporation, company, incorporated, limited partnership, limited liability company, or any other corporate designation. A nonprofit may use club, league, association, services, committee, fund, society, foundation, a nonprofit corporation, or similar name.
To see if your proposed name is available, you can check with the Corporations Division of the Washington Secretary of State’s office or you can search the Corporations Name Search database on the Secretary of State’s website. You can reserve a name which will prevent another nonprofit or business from registering the name while you prepare and file your articles.
See RCW §24.03.045 for more information on name restrictions for nonprofits.
3. Prepare and file your nonprofit articles of incorporation
You create your nonprofit entity by filing articles of incorporation for a nonprofit with the Washington Secretary of State. Your articles of incorporation must include basic information such as:
- the name of the corporation
- its duration, which may be perpetual or for a stated number of years
- the purpose or purposes for which the corporation is organized
- provisions regarding (a) distribution of assets on dissolution; (b) the regulation of powers of the corporation, the directors, and its members, if any; (c) limiting the personal liability of a director to the corporation or its members, if any
- the address of its initial registered office, including street and number, and the name of its initial registered agent at such address
- the number of directors constituting the initial board of directors, and their names and addresses
- the name and address of each incorporator, and
- the name of any person or corporations to whom net assets are to be distributed in the event the corporation is dissolved.
The Washington Secretary of State has a nonprofit articles of incorporation form on its website which you can use to create your nonprofit corporation. Complete and file your articles following the instructions provided. You can file your articles online or complete a fillable articles form and mail it in.
The articles form available from the state has the minimal information necessary to create a nonprofit in Washington. It does not include language required by the IRS to obtain 501(c)(3) federal tax-exempt status. To receive tax-exempt status from the IRS, you'll need to have additional specific language in your articles, including:
- a statement of purpose that meets IRS requirements
- statements that your non-profit will not engage in prohibited political or legislative activity, and
- a dissolution of assets provision dedicating your assets to another 501(c)(3) organization upon dissolution.
For more information on IRS requirements for tax exemption, including sample language, see IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website. Make sure you include the tax-exempt language required by the IRS in the articles you create.
4. Prepare bylaws for your Washington nonprofit corporation
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Washington law. Your bylaws 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 Washington. Your bylaws do not need to be filed with the 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, be sure to create minutes that accurately record the actions taken by the board.
6. Set up a corporate records binder
You should set up a corporate records binder for your nonprofit to hold important documents such as articles 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).
Obtain Your Federal and State Tax Exemptions
Now that you have created your nonprofit corporation, you can obtain your federal and Washington state tax exemptions. Here are the steps you must take to obtain your tax-exempt status:
1. File your Form 1023 federal tax exemption application.
To obtain federal tax-exempt status from the IRS, you will need to complete and file IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. 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 line-by-line instructions on how to complete the Form 1023, see How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).
Smaller nonprofits may be eligible to file Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code. This is a much simpler, shorter form that is filed online. Only smaller nonprofits--those with projected annual gross receipts of less than $50,000 and total assets of less than $250,000--are eligible to use the streamlined 1023-EZ application.
See the IRS website for more information on the Form 1023 and Form 1023-EZ filing requirements.
2. Obtain your Washington state tax exemptions
Washington does not have a corporate income tax so you will not be subject to any state income tax. Check with the Washington Department of Revenue for information regarding any other state tax exemptions.
3. Other state reporting and registration requirements
Depending on your activities and the size of your organization, you may need to register with the state before doing any fundraising activities. The Charities Program at the Secretary of State’s office has information and forms about fundraising and registration requirements for nonprofits.