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 Connecticut corporation, then you then apply for tax-exempt status from the IRS and the State of Connecticut. Here are the details.
In Connecticut, your nonprofit corporation must have 3 or more directors.
The name of your nonprofit corporation cannot be the same as the name of another nonprofit corporation on file with the Connecticut Secretary of State. To see if your proposed name is available, you can search Connecticut’s name database on the secretary of state's website.
In Connecticut, your nonprofit corporation name must contain "corporation," "company," "incorporated," or an abbreviation.
You will need to create and file a nonprofit certificate of incorporation with the Connecticut Secretary of State. As of June 2020, the filing fee is $50. 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).
The Connecticut Secretary of State has a nonprofit certificate of incorporation form on its website which you can use to create your nonprofit corporation. Fill the articles form out following the instructions provided. Alternatively, you may complete and submit the form online.
The articles form includes the minimal information needed to create a nonprofit corporation in Connecticut. It does not include certain language required by the IRS to obtain your federal tax-exempt status. To ensure you get 501(c)(3) tax-exempt status from the IRS, you will need to have additional specific language in your articles including:
For more information on IRS requirements for tax exemption, see IRS Publication 557, Tax-Exempt Status for Your Organization, available on the IRS website. Be sure to include the additional language required by the IRS for 501(c)(3) tax-exempt status.
You’ll need to prepare bylaws that comply with Connecticut 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 Connecticut. 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 Connecticut Secretary of State -- they are your internal operating manual.
Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:
After the meeting is completed, minutes of the meeting should be created. 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).
An EIN is a unique tax identification number for your business, assigned by the IRS. You will use the number on your tax filings, as well as your tax exemption applications. You can submit the free EIN application via the IRS website.
You do not need a statewide business license to operate a nonprofit in Connecticut. Depending on your location and your services, you might need one or more specialized licenses. Check the Connecticut Licesence Search tool to determine what licenses are required for your organization.
To keep your nonprofit in good standing, you must file an initial report, followed by annual reports, with the Secretary of State. The initial report is due 30 days after you organized the nonprofit, and each annual report is due the last date of the anniversary month. For instance, if you formed the organization on March 1st, your due date will be March 30. As of June 2020, the filing fee is $50.
Now that you have created your nonprofit corporation, you can obtain your federal and Connecticut state tax exemptions. Here are the three steps you must take to obtain your tax-exempt status:
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.
Once you have your federal tax exemption, you need to obtain your Connecticut state tax exemption. This may include exemptions from income, property, sales, and other state taxes. Connecticut’s Department of Revenue Services will have a form you need to file to obtain your state tax exemption.
Depending on your activities and the size of your organization, you may need to register with the Connecticut attorney general before doing any fundraising activities. Check with the Connecticut attorney general's website for additional rules, or for more information about fundraising registration requirements, see Nonprofit Fundraising Registration: The 50-State Guide, by Ronald J. Barrett and Stephen Fishman (Nolo).