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 Washington D.C. 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 Washington D.C.? 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 Washington D.C.? 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 Washington D.C. nonprofit organization.
Starting a Washington D.C. Nonprofit: Step by Step
Technically, the process for creating a Washington D.C. 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 District law.
Washington D.C. has pretty simple laws for nonprofit names:
- Your name cannot imply affiliation or identify as a government agency
- Your name cannot include words like “bank” or “insurance” unless you have the Mayor’s approval to do so
- Your name “shall be distinguishable on the records,” or distinct from the names of other entities in the District
If you want more information on District nonprofit names, check out the Permitted Names section of the Code of the District of Columbia.
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 Washington D.C. 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 Corporation & Business Entity Search. Typically, if you type in your desired name and no exact matches show up, then 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 Name Reservation. This optional form costs $50 to submit, but once it’s approved, your name will be protected for 60 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 Washington D.C. 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.
Washington D.C. doesn’t have a bunch of rules about who can serve on the board. The only explicit requirements are that all the directors must be individuals, and you must have a minimum of three directors. As long as you meet those minimum requirements, your bylaws can set all the remaining terms for your directors. For example, you can dictate how each director is appointed, how long they’ll serve, how they’ll resign, how they can be replaced, and more.
3. Appoint a registered agent
Every Washington D.C. entity—nonprofits, corporations, and LLCs alike—must appoint a registered agent. This individual accepts “service of process” from the District on your behalf. Basically, if the District 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.
Washington D.C. has pretty lenient criteria for a nonprofit’s registered agent, as found in The Business Organizations Title of the Code of the District of Columbia:
- Every entity that files with the District of Columbia must appoint a commercial registered agent or a noncommercial registered agent
- A commercial registered agent is one that has registered with the District to be included on the district’s list of agents, usually as a business venture
- If appointing a noncommercial registered agent, the entity may appoint an individual resident of the district, another business entity with authority to operate in the district, or an officer of the entity itself
- 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 Washington D.C. nonprofits, that means filing the Articles of Incorporation.
This one-page document requires some foundational information about your nonprofit. Here’s the data you’ll need to have on hand:
- Your corporation’s name
- Whether or not your nonprofit will have members
- Name and address of your registered agent
- Name and address of each person with control over the business (could be a member, director, or officer)
- Any additional provisions you wish to include, such as provisions for tax-exemption from the IRS)
- Name, address, and signature of each incorporator
All told, this form is pretty simple to complete; you just have to fill in all the requested information. And if you’ve made it this far into this guide, you should have most of it on hand already.
We do recommend that you use the “additional provisions” section to add in the IRS’s recommended language for nonprofits. This language is required if you want to obtain tax-exempt status, but don’t let that overwhelm you; it’s mostly boilerplate text that you can customize for your business’s needs.
Once all the sections are completed, you’ll be set to file the form. You can also file online, if you’d like. But no matter how you submit the form, have $80 on hand to pay the filing fee.
Processing speed: 3-4 weeks for mail-order filings; 10 business days for online
Expedited processing: $50 for 3-day turnaround and $100 for same-day processing
Congratulations! Your nonprofit is now a recognized entity in Washington D.C.!
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. Washington D.C. doesn’t impose strict requirements for your meeting, either. In fact, the District leaves it up to your bylaws to dictate the flow of your meetings.
For example, your bylaws might require your president and CFO to report on the recent accomplishments and financial standing of the nonprofit. For more information on your meetings, please consult the Directors, Officers, and Employees subchapter of the Code of the District of Columbia.
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 Washington D.C. 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 Washington D.C. 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 federal income taxes. However, if you want an exemption from District taxes, you’ll need to apply for it through the Office of Tax and Revenue. It’s not a complicated form, really, and most businesses receive the exemption if they’ve received the IRS designation. However, it’s not a step you want to overlook. Filing this application also helps ensure that you manage any other taxes that apply to your nonprofit.
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, Washington D.C. nonprofits with employees will need to account for withholding taxes and unemployment insurance taxes on the federal and District levels.
There are also miscellaneous industry-specific taxes in Washington D.C., such as fees for baseball, food vendors, 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 Office of Tax and Revenue just to be sure you’ve covered all your responsibilities.
That’s the basic gist of nonprofit taxes in Washington D.C. 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 the District’s requirements for each of those three areas.
A lot of places require you to register in order to solicit charitable contributions, and the District of Columbia is no exception. You’ll have to register online with the DC Business Center before fundraising. The fee is $412.50. That’s a pretty hefty fee, but your registration is good for two years. After that, you’ll need to renew your registration.
A few entities are exempt, so for more information, we recommend consulting the Charitable Solicitations Section of the Code of the District of Columbia.
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. In D.C., a “lobbyist” is classified as anyone who receives $250 in compensation or spends more than $250 on lobbyist activities within a 3-month period. Registration can be completed using the Lobbyist Registration Form; for nonprofits, the fee is just $50.
Once registered, lobbyists are required to submit regular reports of your expenses and activities. For more information on lobbyist requirements, please consult the Board of Ethics and Government Accountability.
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.
In Washington D.C., every single business needs to obtain a general business license. The exact one you’ll need, however, varies depending on your business type; D.C. has a few variations of the license. To learn more about which applies to your business, check out the DC Business Center.
Beyond that, the bulk of D.C. licensing comes at the industry level. The District upholds all federally regulated industry licenses, and the DCRA Permit Wizard 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.
Washington D.C. 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 Department of Employment Services.
Top Resources for Washington D.C. 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 D.C. 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 local level,you can always turn to the Center for Nonprofit Advancement. In their own words, the CNA exists to “strengthen, promote and represent nonprofit organizations, empowering them to meet the diverse, changing needs of our communities.” To make the most of all the CNA has to offer, you’ll want to become a member. Joining grants you access to exclusive discounts, health insurance, resources, and more, so the membership will be worth your while.