How to Form a Pennsylvania Nonprofit Corporation

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 Pennsylvania nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Pennsylvania. Here are the details.

1. Choose directors for your nonprofit.
2. Choose a name for your nonprofit.
3. Appoint a registered agent.
4. File Pennsylvania nonprofit Articles of Organization.
5. File docketing statement.
6. Comply with Pennsylvania's advertising requirement.
7. Prepare nonprofit bylaws.
8. Hold meeting of board of directors.
9. Obtain an EIN.
10. Get business licenses.
11. File your Form 1023 federal tax exemption application.
12. Apply for Pennsylvania tax exemptions.
13. Complete other state reporting and registration requirements.

Form Your Pennsylvania Nonprofit Corporation

First, you need to form a nonprofit corporation under Pennsylvania state law (Pennsylvania Consolidated Statutes, Title 15, Chapters 51-59 ("PCS")).

1. Choose the initial directors for your nonprofit

You must have at least one director on your board in Pennsylvania. Directors must be at least eighteen years old but need not be residents of Pennsylvania.

2. Choose a name for your Pennsylvania nonprofit corporation

The name of your nonprofit corporation must be distinguishable from the name of all other Pennsylvania corporations, foreign corporations, limited partnerships, limited liability companies, and limited liability partnerships on record with the Department of State. To see if your proposed name is available, you can search Pennsylvania's online business name database.

The name of a nonprofit corporation may (but is not required to) contain:

• the word "corporation," "company," "incorporated" or "limited" or an abbreviation;

• the word "association," "fund" or "syndicate; or

• similar words or abbreviations (words of "like import").

You may reserve a name for 120 days by filing a Name Reservation (Form DSCB:15-208) with the Pennsylvania Department of State. The form may be filed online or by postal mail. The filing fee is $70.

3. Appoint a registered agent

Every Pennsylvania nonprofit corporation must have an agent for service of process in the state. This is an individual or corporation that agrees to accept legal papers on the corporation's behalf if it is sued. The agent must have a physical street address in Pennsylvania, not a post office box. Small nonprofit corporations typically name a director or officer to serve as the initial agent. The agent must consent to the appointment.

4. Prepare and file your nonprofit articles of organization

You legally establish your nonprofit corporation by filing a certificate of incorporation with the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations. Your articles of organization must include:

• the nonprofit's name
• the address, including street and number, of your initial registered office in the state
• a brief statement of the nonprofit's purpose--this must comply with IRS requirements (see below)
• a statement that the corporation is incorporated under the provisions of the Nonprofit Corporation Law of 1988
• a statement that the nonprofit does not contemplate pecuniary gain or profit
• a statement whether the nonprofit will issue stock; if stock is issued, the number of authorized shares
• a statement whether or not the nonprofit will have members and additional information related to membership
• the name and address, including street and number of each of the incorporators, and
• the effective date of the articles, if later than the date of filing.

Your incorporator can be a for profit or not-for-profit corporation or an individual 18 years of age or older.

The Department of State has a fillable articles of incorporation form for nonprofits on its website which you can use to create your nonprofit corporation. Complete and file your articles following the instructions provided.

The articles form from the state has the minimal information necessary to create a nonprofit in Pennsylvania. However, to receive 501(c)(3) tax-exempt status from the IRS, your corporation must have certain specific language in its articles, including:

• a statement of purpose that meets IRS requirements
• statements that your nonprofit will not engage in activities unrelated to its exempt purposes or in prohibited political or legislative activity, and
• a dissolution clause dedicating the corporation's assets to another 501(c)(3) organization or to the government upon dissolution.

The Pennsylvania articles form does not contain these required clauses. You must add them to the form yourself. You may add the required language for the purpose clause in the blank space for paragraph 3 on the articles form. The prohibited activities and dissolution clauses should be added as an attachment to the articles.

You can find sample language to use approved by the IRS in the Instructions for IRS Form 1023-EZ, (see Part II).

For more information on IRS requirements for tax exemption, including sample language, consult How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).

The articles may be filed online or by postal mail. The filing fee is $125.

5. File a Docketing Statement with your articles

When you file your articles with the state, you also file a Docketing Statement (DSCB:15-134A). It is a short form that asks for some basic information about your nonprofit. The Department of State has a fillable Docketing Statement form with instructions on its website.

6. Comply with Pennsylvania's advertising requirement

Under Pennsylvania law, the incorporators or the nonprofit (as applicable) must advertise their intent to file or the actual filing of articles of incorporation in two newspapers of general circulation; one newspaper should be a legal journal, if possible. The Department of State has a geographical listing of legal publications to use. You do not file proof of advertising with the state; instead, keep evidence that you complied with this requirement in your minutes.

7. Prepare bylaws for your Pennsylvania nonprofit corporation

Before you file your articles of organization, you'll need to have bylaws that comply with Pennsylvania 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 Pennsylvania. Your bylaws do not need to be filed with the state -- they are your internal operating manual.

For more information on bylaws, see Nolo's article Nonprofit Formation Documents: Articles of Incorporation, Bylaws, and Organizational Minutes. For help creating your bylaws, see Nolo's book How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo).

8. 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:

• electing directors (if not named in your articles)
• 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. Set up a corporate records binder to hold the corporation's articles, bylaws, consent forms, minutes, and other important documents.

For more information, as well as minutes forms, consent forms, and other resolutions, see Nonprofit Meetings, Minutes & Records, by Anthony Mancuso (Nolo).

9. Obtain an EIN

Your nonprofit corporation must obtain a federal employer identification number (EIN). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

10. Obtain Business Licenses

Depending on the type of activities your nonprofit intends to carry on and where it is located, it may need to obtain a local and/or state business license or permit. For local licenses, check with the clerk for the city where the corporation's primary office is located (or county if it is in an unincorporated area). For state license information, consult the Pennsylvania Business One-Stop Shop.

Obtain Your Federal and State Tax Exemptions

Now that you have created your nonprofit corporation, you can obtain your federal and Pennsylvania state tax exemptions. Here are the steps you must take to obtain your tax-exempt status.

11. 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.

12. Pennsylvania state tax exemptions

Once you have your federal tax exemption, you are automatically exempt from Pennsylvania state corporate income tax. To obtain an exemption from sales tax in Pennsylvania, your nonprofit corporation must file Form REV-72 with the Pennsylvania Department of Revenue. Contact local taxing authorities for exemptions from local sales and property taxes.

13. 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 in the state. Check with the Bureau of Corporations and Charitable Organizations for information and forms about registration requirements for nonprofits in Pennsylvania. For more information about fundraising registration requirements, see Nonprofit Fundraising Registration Digital Guide, by Ronald J. Barrett and Stephen Fishman.