Forming a nonprofit corporation is a noble goal. But if you’re just starting out, the process can feel incredibly confusing. Compared to other entity types like LLCs or even standard corporations, a nonprofit has detailed start-up requirements and complicated maintenance procedures.
In this guide, we’ll walk you through the ins and outs of forming a nonprofit in New York so you can get back to what truly matters: your cause.
What is a Nonprofit Corporation?
A nonprofit and for-profit corporation both have similar “nuts and bolts,” so to speak. Both businesses have a board of directors, CEOs, bylaws, annual board meetings, and the like.
But what makes a nonprofit stand out is its purpose. A business corporation typically organizes for financial gain; a nonprofit exists not to make money but to further a cause or reach a goal. Additionally, a business corporation gains investors by offering stock, which has the incentive of dividends and financial gain. Nonprofit corporations solicit contributions that don’t generate any income for those investors.
Well-known nonprofits include groups like Doctors Without Borders, Alcoholics Anonymous, and even your local YMCA.
It’s important not to confuse “nonprofit” with “no income.” Most nonprofits generate income from donations or day-to-day services. The distinction is that nonprofits use 100% of their income to pay expenses and reinvest in their cause. For example, the YMCA uses member dues and community donations for exercise programs, youth sport development, and maintaining their equipment and facilities. They also pay their employees.
Because of this, nonprofit corporations may apply for and receive a tax-exempt status (typically a 501(c)(3) designation), eliminating the corporation’s responsibility for income taxes at the federal and state levels.
Should you form one?
Before you dive into the rest of this guide, you should do a little soul-searching: should you even form a nonprofit in New York? The goal is a noble one, but it certainly isn’t for everyone. And some concepts simply aren’t right for the nonprofit sector.
Here are some questions to ask:
- Will I be able to convince others to buy into this cause? How hard will it be to attract donors?
- Are there other existing nonprofits with the same goal?
- If so, do they operate in New York? Nationwide? Should I form a local chapter of their nonprofit instead?
- Can I further this cause better or differently than they are?
- Can I hire employees for this cause, or will I rely on volunteers? How will I successfully recruit their help?
If you find yourself stumped by any of those questions, you may want to step back and get some help…or simply do some more thinking before diving in. But if you have answers to most of those questions, then you’re well on your way to starting a New York nonprofit organization.
Starting a New York Nonprofit: Step by Step
Technically, the process for creating a New York nonprofit entity is pretty simple. It’s really just a matter of picking a few people and filing some paperwork (it’s the requirements immediately after forming the nonprofit that get complicated).
1. Pick & Claim a Name
Choosing a name is one of the most crucial decisions for starting your business. You want to pick a name that’s memorable, likable, and most importantly, compliant with New York state law.
New York has pretty simple laws for nonprofit names:
- Your name must include the word “Corporation,” “Incorporated,” or “Limited” (or an abbreviation of these)
- Your name must be “such as to distinguish it from the names” of other entities in the state
- Your name cannot include any language prohibited by Section 404 unless you have complied with its restrictions
- Your name cannot include words belonging to certain regulated groups, such as lawyers, insurance, and more
- Names cannot be obscene or offensive
- Your name may not mislead the public
- Your name cannot state or imply a purpose that is against state law or the purpose stated in your Certificate of Incorporation
If you want more information on New York nonprofit names, check out the Corporate Name Section of the Not-for-Profit Chapter of the New York Laws.
As a result, you have a lot of leeway to pick a name that will resonate with your target audience, potential donors, and of course, with you. The ideal New York nonprofit name describes what the organization does, sounds good when said out loud, and just “sticks” in the minds of people who see it.
Whenever you pick a potential name, you should check whether it’s available with a Business Entity Search. Typically, if you type in your desired name and no exact matches show up, your name is available to use. This seems like a very basic step, but it’s crucial to streamlining your filings.
Once you nail down an available name that you like, you can reserve it using the Application for Reservation of Name form. This optional filing costs $20 to submit, but once it’s approved, your name will be protected for 60 days. That gives you a little extra time to prepare other business documents without losing your name to another business or nonprofit.
You can learn more through our guide on how to reserve a New York business name.
2. Assemble your initial board
A nonprofit corporation is only as impactful as the people leading it. That’s why your initial board of directors is extremely important; you’ll want to pick a team of people that are just as passionate about your cause as you are.
More importantly, it’s helpful to choose a group with complementary strengths. For example, a medical outreach group might have a board of directors with three doctors, a nurse, a financial expert, a creative visionary, and a lawyer. The right board of directors will help your nonprofit thrive.
New York doesn’t have a bunch of rules about who can serve on the board. The only explicit requirements are that each director must be at least 18 years of age and you must have a minimum of three directors. As long as you meet those minimum requirements, your nonprofit can set out how many extra directors you’ll have (and their qualifications) in your company bylaws. You can also dictate how each director is appointed, how long they’ll serve, how they’ll resign, and how you’ll replace them.
3. Appoint a registered agent
Every New York entity—nonprofits, corporations, and LLCs alike—must appoint a registered agent. This individual accepts “service of process” from the state on your behalf. Basically, if the state ever needs to notify you regarding a lawsuit or an upcoming annual report due date, they’ll contact your registered agent. The agent forwards that notice to you.
New York has pretty lenient criteria for a nonprofit’s registered agent, as found in the Registered Agent for Service of Process section of the New York Laws:
- Every entity that files with the Secretary of State (both domestic and foreign) must appoint a registered agent
- The agent must be an individual resident of the state OR a corporation with authority to operate in the state
- An agent must be continuously maintained
- If you prefer, you may let the Secretary of State serve as your agent, providing a forwarding address instead
So you might ask, “Can I serve as my nonprofit’s registered agent?” Technically, you can. But we don’t recommend it. That puts your personal details (and often private details like your address and primary email) on the public record. You’ll also be busy running your nonprofit and pursuing your goals; you won’t want to tie yourself down to a registered address (especially for a tedious thing like service of process). We recommend appointing an individual you trust.
Or, if you prefer, you can hire a registered agent service instead. For a small annual fee, these services will act as your agent. That frees you up to focus on running your nonprofit.
4. File your Certificate of Incorporation
Up until now, your nonprofit has just been an idea; it’s not recognized by the state government. Technically, businesses don’t “exist” until they file the appropriate paperwork. For New York nonprofits, that means filing the Certificate of Incorporation.
This four-page document requires some foundational information about your nonprofit. Here’s the data you’ll need to have on hand:
- The name of the nonprofit
- Confirmation that your entity adheres to the not-for-profit statues
- The purpose for your nonprofit
- Whether or not your organization requires approval from specific boards, and if so, an attachment with that approval
- Whether the nonprofit can be classified as a charitable or non-charitable organization
- County where your principal office will be located
- Name and address of each initial director (must have at least three)
- Name and address of your registered agent
- A provision for tax-exempt status, if desired
- Name, signature, and address of the incorporator
- Contact information for the person filing the form
All told, this form is pretty simple to complete; all you have to do is fill in the requested information, and you’ll be set to go. The only potentially tricky section is including the provisions for tax-exemptions, but if you use the IRS’s recommended language for nonprofits, it’s mostly boilerplate that you’ll copy and include in your Articles.
If you prefer, you can also file this form online. No matter how you file, you’ll need to have $75 on hand for the filing fee.
- Processing speed: up to 7 business days
- Expedited Processing: $25 for 24-hour turnaround, $75 for same-day processing, and $150 for 2-hour rush orders
Congratulations! Your nonprofit is now a recognized entity in New York!
Prepare for & Hold Your First Board Meeting
After your Certificate of Incorporation form is complete, it’s time to truly get your nonprofit’s activities underway. And that means it’s time for the first board meeting.
No two board meetings will look exactly the same; after all, every nonprofit has different tasks to accomplish. New York does expect you to have regular board meetings, but the exact specifics of the meetings will be dictated by your bylaws.
For example, at each meeting, your bylaws might require your president and CFO to report on the recent accomplishments and financial standing of the nonprofit at each meeting. Other meetings might have different priorities; ultimately, it’s up to your bylaws. For more information on your board meetings, check out the Meetings of the Board sections of the New York Laws.
Your very first board meeting, however, will look a bit different. Here’s what you’ll need to accomplish:
- Draft and approve the nonprofit’s bylaws: The bylaws dictate exactly how your nonprofit will be run. This includes a detailed rundown of your corporate purpose, how your board will be selected and replaced, how you’ll raise funds, how you’ll hire employees or solicit volunteers, and much more (including a provision for how to amend the bylaws). To save time, you may choose to write a draft before the meeting and revise it when your full board is present. The important thing is that the board approves the final bylaws, making them the governing document for your nonprofit.
- Draft and approve a conflict of interest policy: Occasionally, one of your nonprofit’s contributors will have personal affairs that intersect with the activities of your nonprofit. A conflict of interest policy dictates exactly what happens in those situations, protecting both the nonprofit and the individual contributor.
- Appoint someone to take minutes at each meeting: Every New York nonprofit corporation must establish and maintain a corporate record. That’s why every board should appoint someone to take minutes, or a summary of every board meeting, documenting what was said and what decisions were made.
- Finalize responsibilities for each board member: If one board member will be responsible for fundraising while another raises awareness for the cause, you should assign those roles at the initial board meeting.
- Appoint officers for the nonprofit (if needed): Some corporations choose to have their officers, such as the CEO or CFO, be members of the board. Others appoint non-board members to fill these roles, creating a division between the governance and day-to-day operations. Either choice is fine, but these vital roles should be filled.
This initial meeting will be a very full, technical day (or even series of days!), but nailing down these aspects will help you establish a nonprofit that’s compliant with New York state law and efficiently run.
Take Care of Taxes
Taxes as a nonprofit are a tricky beast; frankly, we recommend getting advice from a tax lawyer, accountant, or similar consultant to make sure you cover all your bases! But let’s take a quick look at the basics for nonprofit taxes.
First, apply for tax-exempt status on the federal level
If you don’t file for tax-exempt status, you’ll technically be liable for corporate income taxes. And that’s the last thing a non-profit wants. That’s why you’ll need to start out by filing Form 1023 or Form 1024, which are the applications for charitable, religious, or educational groups and other nonprofits respectively. After that application is completed, you’ll play the waiting game. The IRS can take up to 180 days to approve or reject your application, so we highly recommend completing the application correctly the first time.
Once your application is approved, you’ll receive a letter of tax-exempt status from the IRS. This automatically exempts you from state and federal income taxes. But if you will be looking for an exemption from state sales taxes, you’ll need to apply for a sales tax exemption certificate. Most nonprofits can receive this exemption without issue. Once it’s approved, nonprofit employees can present the certificate when making purchases to receive the exemption. Remember that this exemption cannot be used for personal purchases.
Obtain an EIN
An EIN, or an Employer Identification Number, is an important identifier to get; it acts a bit like a Social Security Number, but for a business entity. Unfortunately, you aren’t assigned one automatically.
Thankfully, it’s free to apply for an EIN online with the IRS. Even if you don’t plan to have employees right away, it’s a good idea to have this number from the get-go. Miscellaneous forms, such as license applications or even bank accounts, may request this number.
Account for employment & miscellaneous taxes
No two businesses are alike, so each nonprofit will have slightly different taxes. That said, New York nonprofits with employees will need to account for withholding taxes and unemployment insurance taxes on the state and federal levels.
There are also miscellaneous industry-specific taxes in New York, such as fees for paper carryout bags, petroleum, and more. In most cases, these taxes won’t apply to your nonprofit, but it’s still a good idea to double-check with the New York Department of Taxation and Finance just to be sure you’ve covered all your responsibilities.
That’s the basic gist of nonprofit taxes in New York. We still recommend consulting with a tax professional, as they’ll be able to give you specialized advice for your unique situation.
Register for Licenses and Permits
Licenses and permits are especially important for nonprofits. And there are three major categories of potential permits and licenses: fundraising, lobbying, and licensing. Let’s walk through New York’s requirements for each of those three areas.
A lot of states require you to register in order to solicit charitable contributions. And New York is no exception. You’ll need to register with the New York Attorney General (although a few entities are exempt from the registration requirement). The registration fee is $25.
Every year, you’ll need to renew this registration for another $25 (or potentially more, as the renewal fee varies based on your net worth.
If your nonprofit will be lobbying for its cause in a formal capacity, then you’ll need to ensure that each person lobbying has the appropriate registration. Each lobbyist needs to register with the Joint Commission on Public Ethics.
Once you’re registered, you’ll be expected to file regular reports detailing your activities and expenses while trying to influence legislation. For a fuller look at the state’s requirements for lobbyists, check out the Lobbying Overview page by the Commission.
3. General licensing
Nonprofits are tax-exempt, but they aren’t exempt from licensure requirements, whether that’s for an industry-specific license or a state general business license. So you’ll need to get the licenses that apply to your unique organization.
New York, unlike some states, doesn’t have a general business license that every entity in the state needs to get. So most license requirements come at the industry level instead. New York upholds all federally regulated industry licenses, and the New York Licenses Database is a great place to check out the state-level industry requirements. It’s up to you to learn if there are any licenses for your industry, so be sure to complete this step!
Whenever you apply for a license or permit, we recommend inquiring about the requirements for renewing your licenses. That way you’ll know exactly how often you’ll need to renew your licenses (if applicable).
Meet Insurance Requirements
We highly recommend that every business entity maintain at least some sort of general liability policy — even nonprofit entities. There’s always a chance that something can go wrong (no matter how careful you are).
A natural disaster can happen, a break-in might cost you some important equipment, or an accident during day-to-day operations might cause a broken bone and damaged property. A general liability policy will protect your business if something like that happens.
New York state law also requires you to get a workers’ compensation insurance policy if you have employees working for your nonprofit. You can learn more about this requirement with the Workers’ Compensation Board.
Top Resources for New York Nonprofits
Nonprofit work isn’t always easy, but you never have to go it alone! There are dozens, if not hundreds of nonprofit resources available to New York organizations.
On the national level, there’s the National Council of Nonprofits. They exist to advocate for and strengthen nonprofits throughout the country by providing nearly comprehensive resources, teaming up with each state’s nonprofit network, and keeping you aware of the trends in policy and public opinion. It’s also a great place to peruse the latest reports and data about charitable giving and advocacy in the U.S.
On the state level, you can always turn to the New York Council of Nonprofits. In their own words, NYCON strives “to build the capacity of nonprofits and communities to enhance the quality of life through responsive, cost-effective service and by forming a long term, multi-layered service relationship with our member nonprofits.” NYCON does require membership, but joining grants you several advantages, including unique employee benefits for members, conferences, discount programs, and more, so joining will be worth your while.