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 Utah 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 Utah? 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 Utah? 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 Utah nonprofit organization.
Starting a Utah Nonprofit: Step by Step
Technically, the process for creating a Utah 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 Utah state law.
Utah has pretty simple laws for nonprofit names:
- Your name may (but doesn’t have to) contain the words “incorporated,” “corporation,” or “company” (or their abbreviations)
- Your name cannot include the number sequence 911
- Names cannot state or imply that your business is conducting activities contrary to state law or the purpose stated in your Articles of Incorporation
- Your name cannot include words relating to the Olympics or education-related terms unless you have the appropriate permissions to do so
- Your name “shall be distinguishable” from the names of other entities already operating in the state
If you want more information on Utah nonprofit names, check out the Corporate Name section of the Utah Revised Nonprofit Corporation Act.
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 Utah 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 Name Search. Typically, if you type your desired name in and no exact matches pop 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 Business Name form. This optional filing costs $22 to submit, but once it’s approved, your name will be protected for 120 days. That gives you plenty of 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 Utah 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.
Utah doesn’t have a bunch of rules about who can serve on the board. The only explicit requirement is that your board must have at least three directors. As long as you have the minimum three directors, 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 Utah 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.
Utah has pretty lenient criteria for a nonprofit’s registered agent, as found in The Model Registered Agents Act:
- Every entity that files with the Secretary of State must appoint a noncommercial registered agent or a commercial registered agent
- The agent must be an individual resident of the state OR a business with authority to operate in the state
- A commercial registered agent is any agent that has registered to be included on the state database of agents
- An agent must be continuously maintained
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 Articles 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 Utah nonprofits, that means filing the Articles of Incorporation.
This online document requires some foundational information about your nonprofit. Here’s the data you’ll need to have on hand:
- The name of the nonprofit
- A statement of purpose for the nonprofit
- Whether or not the corporation will have voting members
- Name of each initial director (minimum of 3 required)
- The corporation’s street address
- Name and address of the registered agent
- Name, address, and signature of each initial incorporator
Utah is a bit unique because they don’t provide a fill-in form for this procedure; instead, the state gives you a list of required information that you must include in your formation documents. With that, you’ll draft the articles yourself.
Don’t let that deter you; the state does provide you a pretty good sample to follow. All you really need to do is follow that guide and customize it with your organization’s information. If you have especially complicated formation provisions, you may want to get a lawyer’s help.
Once your Articles are drafted, you’ll have to include two copies and file it with the Utah Department of Commerce and Commercial Code. The filing fee is $30.
Processing speed: 7-10 business days
Expedited processing: $75 for turnaround in 1-2 business days
Congratulations! Your nonprofit is now a recognized entity in Utah!
Prepare for & Hold Your First Board Meeting
After your Articles 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. Utah state law does require that you meet at least once every year (you can dictate more meetings in your bylaws, if desired).
Your bylaws will set most of the terms of how these meetings flow, including when and where and how they occur. 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. Other nonprofits will take different approaches. For more information on these meetings, please consult the Directors and Officers section of the Utah Revised Nonprofit Corporation Act.
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 Utah 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 Utah 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 income taxes on the state and federal levels. You can also get an exemption from the state sales tax, but you’ll need to apply for it. The application must be submitted to the State Tax Commission; most nonprofits can obtain the exemption as long as they have the IRS’s exemption status.
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, Utah nonprofits with employees will need to account for withholding taxes and unemployment insurance taxes on the federal and state levels.
There are also miscellaneous industry-specific taxes in Utah, such as fees for restaurants, transient rooms, groceries, 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 Utah State Tax Commission just to be sure you’ve covered all your responsibilities.
That’s the basic gist of nonprofit taxes in Utah. 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 Utah’s requirements for each of those three areas.
A lot of states require you to register in order to solicit charitable contributions, and Utah is no exception. More specifically, you cannot even begin soliciting donations until after you have received approval from the state.
The application can be submitted with the Division of Consumer Protection for a $75 fee. The registration has to be renewed every year, too. Once the registration is approved, you’ll be set to collect contributions.
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. Utah technically has two types of lobbyists: state lobbyists and local & educational lobbyists; the only important distinction between the two types is who the lobbyist’s audience is.
Before lobbying, both lobbyist types need to register with the Division of Financial Disclosures, and the registration needs to be renewed each year. For more information, please consult the state’s Lobbyist website.
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.
Utah does require businesses to obtain general business licenses, but these requirements come on the city and county levels; you won’t apply directly with the state. We recommend consulting with your local government to see what the requirements are in your area.
Beyond that, the bulk of licensing requirements come at the industry level instead. Utah upholds all federally regulated industry licenses, and the Department of Occupational and Professional Licensing is a great place to check out the state-level license 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.
Utah state law requires most businesses to get a workers’ compensation insurance policy if they have employees working for them. You can learn more about this requirement with the Utah Insurance Department.
Top Resources for Utah 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 Utah 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 Utah Nonprofit Association. In their own words, UNA exists to “provide its members and partners the opportunity to engage in meaningful and dynamic relationships.” UNA does require membership, but joining grants you several advantages, including unique fundraising tools, networking opportunities, and more, so joining will be worth your while.