Starting a non-profit organization is not an easy task, but it can be rewarding when done properly. It’s important to have a clear picture of your needs before determining if the non-profit structure is right for what you’re trying to accomplish. Assuming that you’ve already made this decision, built up your team, and created a solid business plan, it is essential to ensure that each step in registering your non-profit organization is done properly.
During the formation of your Indiana non-profit organization (also known as a non-profit corporation), there are three separate agencies that will be involved: the Indiana Secretary of State, the Indiana Department of Revenue, and the Internal Revenue Service. The requirements of each agency must be met to ensure compliance, and each agency has its own specific reporting requirements.
First, you’ll need to file your Articles of Incorporation with the Secretary of State. These rules set the founding date for your organization, and set the basic rules by which the non-profit operates. Although not filed with the Secretary of State, you’ll also want to make sure that you have a properly drafted Operating Agreement at this time.
Next, you will have to obtain an Indiana Taxpayer Identification Number from the Indiana Department of Revenue. This agency is also responsible for issuing your non-profit’s authorization for sales tax exemption. Both of these are accomplished by filing Form NP-20A.
Organizing your Indiana non-profit organization at the state level does not automatically grant the organization exemption from federal income tax. As a result, you will have to register your non-profit organization with the Internal Revenue Service. This is the most involved step in the process of creating your non-profit, and in order to qualify as tax-exempt from federal income taxes, your non-profit must meet the requirements set forth by the IRS.
The IRS will issue the non-profit’s Employee Identification Number, or EIN. This can be done by completing IRS Form SS-4 and submitting it to the IRS. It’s important to note that the non-profit organization will need an EIN even if it has no employees. The EIN is essentially the equivalent of the non-profit’s Social Security Number, and is used by the IRS for identification purposes. This is not the same as the Indiana Taxpayer Identification Number.
Officially obtaining 501(c)3 status for your Indiana non-profit organization is much more involved. IRS Form 1023 is the application. Form 1023 is lengthy, and approval is not guaranteed. The IRS carefully reviews each application to ensure that the non-profit organization is a genuine charity. The process can take several months before a determination is made. The fee for this application ranges from $300-750, so it is important to fill the form out accurately and completely. There is a shorter application that may be used in certain situations.
If the IRS finds that your Indiana non-profit organization meets the qualifications set forth in Section 501(c)3 of the Revenue Code, it will issue a Determination Letter. Note that this letter is critically important to everything from grant applications to tax exempt filings, so be sure to make a digital copy and keep the original in a safe location. It should be noted that houses of worship are not required to apply for 501(c)3 status, although some choose to do so.
Beyond the base requirements mentioned above, there are several other steps you’ll want to take in order to put your Indiana non-profit organization in the best possible position to succeed. The Data Universal Number System (DUNS) is operated by Dun and Bradstreet. All federal grants and contracts require that a potential vendor obtain a DUNS number. Many private foundations also use the DUNS number for identification purposes.
After an Indiana non-profit organization is properly established, there are ongoing reporting requirements for each of the Indiana Secretary of State, the Indiana Department of Revenue, and the Internal Revenue Service. Indiana non-profit organizations must file an annual entity report with the Indiana Secretary of State. An organization must be current in its business entity reports to be eligible for state or federal grants. Failure to file this report will eventually result in administrative dissolution of the non-profit, meaning it will cease to exist in the eyes of the state.
Indiana non-profit organizations must file Form NP-20 with the Indiana Department of Revenue. This form is due annually at the same time as the Federal Form 990. Failure to file Form NP-20 will cause a non-profit to lose its state sales tax exemption.
All 501(c)3 corporations, aside from houses of worship, with an annual income over $25,000 must file the above-mentioned Form 990 or 990EZ annually. For most non-profit organizations, this is due May 15th. Note that an organization’s Form 990 is public, and potential funders and donors may use a non-profit’s 990 for initial research.
Finally, it should be noted that a non-profit organization has the same obligations to its employees as any other employer. Thus, reporting of wages and withholding of income and social security taxes is a continued responsibility of the non-profit. And while 501(c)3 organizations are usually except from income tax, their employees are not.
This information does not contain every solution for every possible scenario your nonprofit may encounter, both at formation and along the way. It’s important to have an experienced professional assisting your non-profit. Contact the attorneys at McNeelyLaw for all of your Indiana non-profit corporation needs.
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