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 Wisconsin nonprofit corporation. Then you apply for tax-exempt status from the IRS and the state of Wisconsin. Here are the details.
To form a nonprofit in Wisconsin, first you need to form a nonprofit corporation under Wisconsin state law (Wis. Stats. Ch. 181).
In Wisconsin, you must have three or more directors on your board.
The name of your nonprofit must contain the word “corporation”, “incorporated”, “company”, or “limited,” or the abbreviation “corp.”, “inc.”, “co.” or “ltd.,” or comparable words or abbreviations in another language. To see if your proposed name is available, you can search the Wisconsin Department of Financial Institutions Corporate Records database. See Wis. Stats. §181.0401 for more information on name restrictions for nonprofits.
You may reserve a name for 120 days by filing a Name Reservation Application (Form 1) with the Wisconsin Department of Financial Institutions. The reservation must be filed by postal mail. The filing fee is $10.
Every Wisconsin 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 Wisconsin, 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.
You create your nonprofit entity by filing articles of incorporation for a nonprofit with the Wisconsin Department of Financial Institutions. Your articles of incorporation must include:
The Wisconsin Department of Financial Institutions has a nonprofit articles of incorporation form on its website (Nonstock, not-for-profit corporation, Form 102) which you can complete online and file electronically. You can also download a paper form and file by postal mail.
The articles form available from the state has the minimal information necessary to create a nonprofit in Wisconsin. It does not include language required by the IRS to obtain 501(c)(3) federal tax-exempt status. To receive 501(c)(3) tax-exempt status from the IRS, your corporation must have certain specific language in its articles, including:
You'll need to add these clauses to your articles yourself. You can add them in Article 8, Other Provisions, which is blank. 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 through the Wisconsin Secretary of State website or by postal mail. The filing fee is $35.
Before you file your articles of incorporation, you’ll need to have bylaws that comply with Wisconsin 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 Wisconsin. 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).
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. 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).
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.
Depending on the type of activities your nonprofit intends to carry on and where it is located, it may need to obtain a state business license. For local licenses, check with the clerk for the city where the nonprofit's primary office is located (or county if it is in an unincorporated area). For state license information, consult the Wisconsin Department of Safety and Professional Services.
Every Wisconsin corporation must file an annual report with the Department of Financial Institutions. The report may be filed online at the Department of Financial Institutions website. Alternatively, you may complete a fillable Nonstock Corporation & Limited Liabililty Company Annual Report form online and file it by postal mail.
The annual report is due at the end of the calendar quarter of the anniversary month of the corporation's formation. For example, a corporation formed on July 15 must file the report by September 30. The due dates are March 31st, June 30th, September 30th, and December 31st. The Department will send a notice to your corporation's registered agent with instructions on how to complete the online filing. There is a $10 filing fee.
Now that you have created your nonprofit corporation, you can obtain your federal and Wisconsin state tax exemptions. Here are the 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 your nonprofit receives 501(c)(3) tax-exempt status from the IRS, you are automatically exempt from Wisconsin’s income tax. For information and filing requirements for exemptions from sales and use tax and property taxes, check with the Wisconsin Department of Revenue.
Depending on your activities and the size of your organization, you may need to register with the Wisconsin Department of Financial Institutions. See its website for more information and forms related to fundraising and registration requirements for nonprofits. For more information about fundraising registration requirements in all 50 states, see Nonprofit Fundraising Registration Digital Guide, by Ronald J. Barrett and Stephen Fishman.