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ten
steps
for starting a
Nonprofit, Tax-exempt Corporation in Connecticut
with hyperlinks to the
necessary documents and filing
instructions;
where there is no hyperlink there is no prescribed form -
consult
a formbook or
seek legal advice (SEE DISCLAIMER)
NOTE: SOME FORMS HAVE BEEN COPIED
BY ME AND TURNED INTO FILLABLE FORMS; I RECOMMEND THAT YOU CHECK
THE OFFICIAL FORM ON THE APPLICABLE WEBSITE (DRS, IRS) TO MAKE SURE THE
FORM IS CURRENT
(LAST UPDATED 1/28/2010; PLEASE
NOTIFY
ME
if you find BAD LINKS or errors)
BEFORE YOU
START -- SURE YOU WANT TO DO THIS? Click
for a list of factors
you may wish to consider
Step
1. INCORPORATION DOCUMENTS; Action by Incorporators. Incorporators
adopt a certificate of incorporation and bylaws, appoint directors and
statutory
agent for service. The incorporators may also appoint officers to serve
until
the directors' meeting, although it is more common to have the
directors do this
at their first meeting, or by consent.
Documents required
for incorporators' meeting:
-
Certificate of Incorporation. This
should contain appropriate language to permit
qualification as tax exempt (be sure to read IRS Publication 557
BEFORE submitting -- not all purposes or activities qualify for
examption), and is signed by (1) incorporators and (2) a
Connecticut resident as "statutory agent for service," accepting
appointment. You may file using the State form with attachments, or
skip the state form if your document includes the same information as
the state form requires. A Connecticut business address is also
required. Remember that this document trumps your bylaws. In other
states this may be known as the "articles" of incorporation.
-
Minutes of
the meeting (signed by duly appointed secretary of the meeting) OR unanimous
written consent (signed by all incorporators) stating that bylaws
have been adopted, directors elected, and any other actions
taken. It is my view that incorporators may appoint initial officers
rather than leaving this to the directors.
-
Bylaws
(preferably signed by incorporators). Make sure these are
consistent with the certificate!
Step 2.
Action by Directors. Directors
meet and elect
officers (if not already done), authorize application for tax exemption
and select counsel to
assist, and any other pertinent matters (e.g. authorize opening bank
account).
Documents required
for directors' meeting :
-
Minutes of
meeting (signed by secretary) OR unanimous written consent
(signed by all directors).
-
State form: Organization and First Annual
Report (signed by an officer). Residential and business
addresses required. No P.O. Boxes are acceptable.
Step 3. FILING WITH SECRETARY OF THE STATE.
Documents to be filed:
-
Certificate of Incorporation.
(State form or your substitute so long as it includes everything in the
state form.) SEE
ABOVE regarding the required ingredients!
-
Organization and First Annual Report.
(State form required.)
Fees:
EFFECTIVE 10/1/09: $100
filing fees (previously, $65) consisting of $20 (certificate) +
$30 (franchise tax) + $50
(annual report) ; add $50 (was $25) for expedited
service; add $50 (was $25) for certified copy of certificate of
incorporation -- for a total of $200. Click for Complete Fee
Schedule. (PDF)
NOTE:
The expediting fee
applies to EACH thing you want expedited.
Example: You want
to file expedited plus you want the certified copy expedited. Add
$100 ($50 each).
Timing: Can
obtain confirmation within 48 hours of filing.
Step
4. File with Public
Charities Unit of Attorney General's Office. Before any fund-raising, either file an Exemption Certificate CPC-54 (for example, if
anticipate fundraising gross
revenues of under $50,000, if a church, or another exemption applies),
or a Registration Certificate PCUREG-1.
Each requires signature of two
officers and $25 fee. You can
postpone this if not fundraising. REMEMBER, until the IRS has
recognized the organization as exempt, it should not tell donor that
donations are tax-deductible. However, if IRS
does grant recognition on an application that is timely filed (within
27 months of incorporation), deductions WILL BE deductible retroactive
to teh date the organization was incorporated.
Step
5. OBTAIN tax ID number FROM
IRS (often needed to open a bank account; needed to
complete exemption application):
Documents:
-
If applying by
mail or fax: IRS Form SS-4
(application for employer identification number); may be applied for
earlier. Read
the instructions. Must be signed by
officer, preferably president, and must include social security number
of filer. Since December, 2001, the form permits a third party
to be named to whom the number, once assigned, may be given if the SS-4
is submitted by fax/internet. However, this doesn't work if you
use the same address for the organization and the "third party"; also,
technically the IRS will require that the organization have
executed
IRS Form
2848 (Power of Attorney)
naming the "third party" as power of attorney. (For a
corporation, generally this means an accountant or attorney can be the
"third party," not just an officer.) If sending by
fax: see page 2 of instructions) - get number within a few days.
- If
applying online: NO FORM REQUIRED -- use the IRS interview
format. CLICK HERE.
The EIN is "provisional," and the IRS may fax with follow-up questions.
- Officer
can call
directly and get a number over the phone. A third party cannot do this.
Step 6. APPLY TO IRS FOR RECOGNITION OF EXEMPTION.
Documents to be
prepared and filed with IRS (you can fill them in online, then print
them out):
-
IRS Form
1023 Application (signed by President). Read the
instructions first! Be detailed! Answer "NO" to the
question about political activity! For help understanding the
"public support" requirements, read "Remember Your Fractions." NOTE: the form "linked" on this page
is the current form revised in 2006, with updated fees eff
10/1/2009.. Earlier versions are not
accepted.
-
If an attorney or
accountant is filing: IRS Form
2848 (Power of Attorney).
-
If organization
is making an election under section 501(h) to have its lobbying
measured by a specific set of numerical guidelines, IRS Form
5768.
- BE SURE YOU HAVE CHECKED the
list on "Office
of Foreign Assets Control"
to make sure your organization includes no "specially designated
nationals" or "blocked persons" who may be viewed as those who are or
aid terrorists and make sure this any grant, etc. procedures address
this issue.
Fee:
Postmarked after
1/3/2010: $850 ($400 if
expect income to be $10,000 or less annually) (IRS is developing
an online tool called "Cyberassistant" -- once developed fees will be
$850 without, $200 with, notwithstanding size.
Send a bank check or certified check to
speed up handling.
Timing:
usually must be filed within 27 months of
incorporation in order for tax exemption to apply retroactively to
incorporation date. (Exceptions apply for very small organizations and
in limited circumstances.) However, obtaining a determination may
take 3-6
months. Often IRS will acknowledge receipt and promise to respond
in 100 days. At that point, may send a request for further
information requiring response within a short period of time. If
reply is not received, IRS may inactivate request. Application
may be reactivated if requested within 90 days.
Step
7. REGISTER WITH CT DEPARTMENT OF REVENUE SERVICES.
Form: REG-1,
application for tax registration number. (You may be
able to register on-line -- but you will have to send the IRS
letter separately
so the old way may be just as good.) Phone number and social
security numbers of 3
officers required. Must attach IRS letter (or
explain that it is pending, and then follow up later with the IRS
letter.)
Fee: None,
unless likely to engage in sales.
Timing issues:
none.
Step
8. ct SALES tax exemption is automatically available for payments made by
organization's check or credit card: use Form CERT-119 and attach the IRS
exemption letter. For other exemptions, see the DRS page.
STEP 9. TOWN HALL: CT PROPERTY
TAX EXEMPTION is important if the organization owns real
estate or any significant TANGIBLE PERSONAL PROPERTY including office
equipment, computers, etc. The organization must file Form M-3 by
November 1st of the year it owns property in the town where it would
otherwise be subject to tax and then quadriennially (computed with 1965
as the first year: 2009 was the most recent quadriennial filing,
then
2013, and so on.) In most towns, the property will not be exempt
until the tax year following
the filing.
STEP 10.
KEEP IN GOOD
STANDING AND RETAIN EXEMPTION. See the accompanying COMPLIANCE LIST. In
particular: the IRS will monitor filings of Form 990 / 990-EZ to see
whether you continue to qualify as a "public charity." This is
determined using a rolling average of your sources of support over five
years, the current year and four prior years, as reported on the
990. This gets confusing, so read "Remember Your Fractions." If
you "fail" the test, the 501(c)(3)
exemption is unaffected, but status as a private foundation may cause
additional
filing requirements and the imposition of an excise tax on net
investment
income, plus a fine of up to $20 / day for failure to file the
informational
return
required of private foundations, Form 990-PF. Therefore, it is
very
important to follow up.
Need help? If you are
unable to afford an attorney (fees usually run $2,000 to $5,000+) you
may be eligible for assistance from Yale Law School students at the
Yale Law School Nonprofit Organization Law Clinic. Contact Professor John Simon and explain
your situation. If you are an organization with a large budget
and a big problem but no money for legal fees, contact the Pro Bono Partnership.
You may also be able to obtain help from an
accountant volunteer with Community
Accounting Aid & Services, Inc. (sponsored by the CT Society of
Certified Public Accountants).
DISCLAIMER:
THIS INFORMATION IS NOT PROVIDED AS LEGAL
ADVICE AND CREATES NO
ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL
ADVISORS.
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