Non-Profit Corporations

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Start a Non Profit in Florida

How To Form A Florida Nonprofit

A nonprofit corporation is a type of business entity designed for groups who are formed for a purpose other than monetary gain.  The types of organizations that usually become nonprofits include charities, sporting clubs, political organizations, religious groups, and educational institutions.  Any money generated by the organization must be used to benefit the community in some way or be donated to another nonprofit group.

After your organization has registered as a nonprofit corporation, you can apply for tax-exempt status under Section 501(c)(3) of the US Internal Revenue Code.  This can dramatically improve the effectiveness of your organization and its contribution to the local community.

This guide will help you understand how Florida Nonprofit corporations are formed and how they differ from other types of business entities.  It will also detail the advantages of forming a Nonprofit corporation. If you have any further questions about forming a Nonprofit corporation in Florida, contact FL Patel Law PLLC on (727) 279 5037.

What is a Nonprofit Corporation?

Despite the name, Nonprofit corporations are allowed to make a profit.  However, any profit generated must be spent on furthering the goals of the organization — be they improving educational standards, helping a sport’s team or feeding the homeless.  Any profit created cannot be given directly to a private person.

Nonprofit corporations are allowed to spend some of the money they generate on normal expenses like employees, overheads, and managerial costs.  However, they are not allowed to distribute profits to shareholders, managers, or members like a normal corporation would.

A Nonprofit corporation is a separate legal entity, similar to C Corporations and S Corporations.  This means it offers legal protections to the managers and employees of the organization.

Although anyone can register a Nonprofit corporation, only certain organizations will be approved for tax-exempt status.  This allows the corporation to significantly reduce or eliminate the taxes they pay.  The rules surrounding tax-exempt status are spelled out in Section 501(c)(3) of the US Internal Revenue Code.  We’ll provide more information on obtaining tax exemptions below.

What types of organizations can be Nonprofit corporations?

Any organization that has been established for a noncommercial purpose that benefits the community can become a nonprofit.  There are already more than 70,000 nonprofits in Florida, providing a range of services including money for cancer research, homeless shelters, and assistance for veterans.

Before you start your nonprofit, you should identify an unmet need that you wish to fulfill.  There may already be an organization that provides a similar service.  If that is the case, you may be better off helping that organization achieve their goals.

If often helps to create a mission statement before starting your nonprofit.  It will help you define how your organization will contribute to the public good, how you will raise money, who will be involved, and so on.

Florida recognizes many different types of nonprofit organizations, including charity groups, religious groups, veterans groups, and scientific organizations.  However, none of these groups will automatically qualify for tax exemptions at either the state or federal level.  The organization must meet a separate set of standards to become tax exempt.  The process for starting a Nonprofit corporation is relatively simple and is outlined below.

What types of organizations can qualify for tax exempt status?

IRS Publication 557 has a full list of all of the types of organizations who can be nonprofit corporations and register for tax exempt status in sections 501(c)(1) to 501(c)(29).  The organizations that can apply for full tax exemption include:

  • Religious organizations
  • Educational organizations
  • Charitable organizations
  • Scientific organizations
  • Literary organizations
  • Testing for Public Safety organizations
  • Organizations that foster National or International Amateur Sports Competition
  • Prevention of Cruelty to Children or Animals Organizations
  • Corporations Organized under Act of Congress (including Federal Credit Unions)
  • Fraternal Beneficiary Societies and Association
  • Domestic Fraternal Societies and Associations
  • Cemetery Companies

To register for federal tax exemption status, your organization must be a corporation, articles of association, community chest, fund, or foundation. It is also possible for trusts that are a fund or foundation to qualify. Individuals and partnership cannot qualify for tax exemption.

Advantages of forming a Florida nonprofit corporation

Limited liability protection

A nonprofit corporation is a separate legal entity.  That means any lawsuits or creditor claims against the organization are limited to the assets that the organization owns.  The managers, officers, trustees, and employees of the organization are legally protected from these claims.

 Donations are recorded as not taxable

If your nonprofit achieves tax exempt status, all donations can be recorded as tax free by donors.  This is a fantastic incentive that can increase the number of donations that your organization receives.

Enhanced credibility
Registering as a nonprofit corporation shows prospective employees, partners and donors that you mean business.  It will help you attract the talented people necessary to help your organization succeed.

Perpetual existence
Your nonprofit corporation will continue even after its founder or managers leave the organization.  This allows you to create an organization with a long-lasting legacy.

Eligibility for grants
Nonprofit organizations are eligible for additional types of public and private grants.

Florida nonprofits can obtain additional advantages

Some Florida nonprofits can obtain exempt status for other taxes and fees, including property tax and cheaper postage rates.

Disadvantages of forming a Nonprofit Corporation in Florida

Your organization must keep excellent records
Nonprofit corporations must maintain excellent records to maintain their Section 501(c)(3) tax exempt status.  This can be quite time consuming and increases managerial costs.

Nonprofit corporations can be quite expensive to start
There are quite a few initial expenses associated with starting a nonprofit corporation.  If your organization is very small, it may be worth delaying incorporation until you really need the features it offers.

Your organization will lose some autonomy

Once your organization is registered as a tax exempt nonprofit corporation, it will have to deal with various reporting requirements and must behave in a certain way.  This means you may lose some independence and autonomy over what your organization can do.

How do you become a Florida Nonprofit corporation?

Choose an organizational jurisdiction

All states of the United States have a similar process when it comes to forming a nonprofit corporation.  This process includes choosing a name, filing articles of incorporation, and applying for tax exemptions.  However, the reporting requirements of nonprofit companies can vary between different states.  This may be a factor to keep in mind when choosing an organization jurisdiction.

Choosing a name
The first step for creating a new nonprofit corporation is choosing a name.  Your organization’s name must be unique and comply with certain rules including:

  • The name should not be in use by another entity
  • The name should not be trademarked by another person
  • The name must include the words “corporation”, “incorporated”,“” or “inc.”
  • The name cannot include the words “company” or “co.”
  • The name must not imply that your nonprofit corporation is organized for a purpose other than that permitted under the organization’s articles of incorporation or under Florida law.
  • The name cannot imply that your organization is somehow affiliated with the government

You can check the availability of a name on the Florida Department of State, Division of Corporations website.

Employ incorporators and directors

The incorporator is the person who will sign the articles of incorporation for your new nonprofit.  The directors will make up the governing body that determines the actions taken by your organization.  To meet the legal requirements in Florida, you will need least three unrelated individuals to be directors.  You will also need one officer who is responsible for preparing minutes of director meetings and authenticating the records of corporation.

Appoint a registered agent

The registered agent is a person who receives legal notifications for your organization.  They must be located in Florid and have an office that can receive correspondence.  Many Florida nonprofit corporations choose a lawyer to be their registered agent.

Drafting the articles of incorporation

Florida nonprofit corporations are formed when the articles of incorporation are received by the Florida Department of State.  The articles of incorporation must include the following details:

  • The name of your corporation
    The name must be unique and available (as mentioned above).
  • The location of your corporate office
    They will require the street address of your organization’s office and its mailing address (if different).
  • Corporate purpose
    This section will detail the purpose of your nonprofit organization. It can be any lawful purpose other than making a monetary gain for a private person.  In Florida, the most common purposes are religious, horticultural, political educational, historical, athletic, scientific, civic, and patriotic.
  • Election of directors
    You will have to list the rules for electing, appointing, or removing directors. There may be more detailed rules for changing the number of directors in the organization’s bylaws.
  • Registered agent
    The street address and name of the corporation’s registered agent must be included. You will also have to include a written letter from the agent indicating they accept the position.
  • Incorporators
    The names and addresses of the people acting as incorporators.

There are some other optional items that can be included in the articles of incorporation, including:

  • The names of the directors
    You can include the personal details of the directors that will be initially apportioned
  • Different classes of membership
    You can provide more details on the different membership classes for people who will be involved in the organization.
  • The manner of termination of membership from the corporation
    The processes for removing people from membership positions.
  • The distribution of assets upon liquidation
    You may wish to define rules for liquidating assets if the organization is dissolved.
  • Names of initial members

Filing the Articles of Incorporation

Once the draft articles of incorporation have been completed, they should be carefully reviewed by the corporation’s organizers.  The articles of incorporation are then signed and filed with the Florida Secretary of State.  The government allows these documents to be submitted via email or mail.

While there is no form of expedited processing available, the Florida State Department is usually very prompt when receiving and assessing articles of incorporation.  If the articles meet all of the statutory requirements, the Secretary of State will file them and notify the organizers of the submission.

In Florida, there is a $35 filing fee + $35 designation of registered agent fee.  Turnaround is usually between 1 to 3 days for online submissions and 8 to 17 days for mail submissions.

Protecting your organization’s name

At this point, your organization should register any trademarks and services marks with the Florida Department of State.  Any marks you submit must meet the requirements spelled out in Chapter 495 of the Florida Statutes.  In addition, you may have to register your trademark of service mark federally with through the Trademark Electronic Application System (TEAS).

Drafting bylaws

Your nonprofit corporation must also develop a set of bylaws that dictate how it is run. At a minimum, the organization’s bylaws should cover the following items:

  • Procedures for calling meetings
    This will include details of who can call meetings, how many meetings should occur each month, where meetings will be held, and who will take minutes.
  • Board of directors requirements
    This section will describe how many directors will be on the board, the quorum and action requirements at meetings, and the committees that will be in place.
  • Officer positions
    Details of the executive officer positions and their individual responsibilities.
  • Voting rights
    The rules for voting should be included. This will cover who is allowed to vote, how many votes are required to form a majority and so on.
  • Miscellaneous matters
    Any other details relating to how the corporation is formed or run can be included.

You should have a lawyer review your nonprofit’s bylaws to ensure they are correctly worded and cover all important aspects.

Obtain an Employer Identification Number (EIN)

This is a nine-digit number that is given to your corporation by the IRS.  Every nonprofit will have to apply for an EIN, even if they do not have employees.  It will be used to open bank accounts, submit 990 returns to the IRS, and apply for 501(c)(3) status.  Use IRS Form SS-4 to obtain an EIN.

Obtain Florida State tax identification numbers

Your nonprofit will need to obtain a tax identification number from the Florida Department of Revenue.  Obtain it using Form DR-1: Florida Business Tax Application.

Store your records
At this stage, you will have many types of official documents relating to your corporation, including articles of incorporation, EIN certificates, and corporate bylaws.  Store these records in a very safe location.

 Apply for 501(c) tax exemption status

Your nonprofit corporations can now apply for 501(c)(3) status with the IRS.  This will make your nonprofit exempt from paying federal taxes.  However, there are very stringent requirements for obtaining 501(c) status, including:

  • Your nonprofit must create a purpose statement that shows how it will use the funds that are raised. It must be a suitable purpose that benefits the public good.
  • The company must operate solely within the guidelines set out by the purpose statement
  • You must name a board of directors to manage high level decisions. They must be individuals and not corporations.
  • The assets of the corporation must be dedicated to other charities. That means the nonprofit’s assets will be given away to charity if it dissolves.
  • The corporation must have already gone through the steps listed above, including applying filing articles of incorporation, obtaining an EIN and so on.

 

Apply for state tax exemptions

If your nonprofit has successfully received 501(c)(3) tax exempt status from the IRS, you may also be eligible for state tax exemptions.  These exemptions will be used for sales tax and use tax purposes.  Your nonprofit can file for exemption using DR-5: Application for a Consumer’s Certificate of Exemption.

Register for charitable solicitation

If you intend to raise money from the general public, you may have to register your organization with the Florida Department of Agriculture and Consumer Services – Division of Consumer Services.  Certain types of nonprofits will not have to register, including religious institutions, educational institutions, and political groups.  To register in Florida, use the Charitable Organizations / Sponsors Registration Application Form.

Where Should I Get Started When Forming a Nonprofit in Florida?

Forming a nonprofit in Florida can sound like a good idea until you see the work it takes.

Your 501(C)3 needs a board of directors and a unique name, but you will also have to prepare your nonprofit’s articles of incorporation. These documents include necessary information, plus how your directors will be elected or appointed and who will be the registered agent in Florida.

A Florida nonprofit formation attorney can steer you away from prohibited nonprofit activities, but more importantly, assist you in preparing the bylaws of your organization, recommend systems for keeping records, and walk you through the steps of obtaining state and federal tax exemption certificates.

Make sure you have a knowledgeable business attorney by your side when starting a nonprofit in Florida. If you would like to setup a nonprofit in Tampa, Florida, contact our law office we can help give you the guidance you need.

 

 

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