Charitable and nonprofit organizations play an important role in American society. Many of these organizations enjoy tax-exempt status as nonprofit corporations under §501(c)(3) of the Internal Revenue Code (IRC), which can be a complex status to establish and protect. Having an Arizona nonprofit lawyer available to guide you through the process of creating and maintaining your nonprofit corporation and tax-exempt status is critical to ensuring that you comply with all applicable local, state, and federal laws.
Here are seven steps that you will take as you go through the process to form a nonprofit corporation in Arizona.
- Choose a Name for Your Nonprofit Corporation – You will need to choose a name that is distinctive, available in your state, has an available domain name for a website, and relates to the mission of your nonprofit. You should perform a Preliminary Name Search on the websites of the Arizona Corporation Commission (ACC) and the Arizona Secretary of State to ensure that your chosen name is not already taken. You also can reserve your name with the ACC for up to 120 days for a $45 fee. You also will need to ensure that your chosen name does not infringe on an existing trademark or service mark by searching the U.S. Patent & Trademark Office’s database.
- Recruit a Board of Directors – In Arizona, you must have at least one Director, although having more than one Director is advisable; many states require at least three Directors. Most of these Directors should be independent parties who are at least 18 years old and support your charitable cause.
- Prepare, File, and Publish the Articles of Incorporation – The Articles of Incorporation legally create your nonprofit corporation. These Articles must follow state and federal laws. The Articles also must meet certain requirements if you are seeking tax-exempt status under federal law. Next, you must file the Articles of Incorporation with the ACC, along with a $40 filing fee and the Certificate of Disclosure described below. If the principal business address of your corporation is outside Maricopa or Pima Counties, then you also must publish your Articles of Incorporation in a newspaper of general circulation.
- Prepare and File the Certificate of Disclosure – Initial directors and officers of your nonprofit corporation must disclose bankruptcies, criminal convictions, and administratively dissolved companies. To form a nonprofit corporation, you must file this Certificate with the ACC along with your Articles of Incorporation.
- Prepare the Bylaws and Governance Policies – You must prepare Bylaws to form a nonprofit corporation, which are the internal rules that govern how the organization is run. For instance, Bylaws determine how Directors are selected and how decisions are made. Governance policies are also critical to any successful nonprofit organization. Examples of these policies are conflict of interest, whistleblower, confidentiality, signature authority, and travel expense reimbursement policies.
- Obtain an Employer Identification Number – You will need an employer identification number (EIN) from the IRS to open a bank account for your nonprofit corporation, which you can apply for online.
- Apply for Tax-Exempt Status – The most common type of tax-exempt status is under 501(c)(3) of the Internal Revenue Code (IRC), although other tax-exempt statuses do exist. You can apply for this status through the IRS online. To be tax-exempt, your nonprofit corporation must exclusively pursue one of the following purposes: charitable, educational, religious, literary, testing for public safety, preventing cruelty to animals or children, or promoting amateur sports competition. You may need to provide certain documents to support your application for tax-exempt status, including copies of contracts, grant applications, or cost-sharing agreements.
Arizona does not require nonprofit corporations to submit separate filing to qualify for tax-exempt status at the state level. However, if you plan to have employees or qualify for other state tax exemptions, such as transaction privilege or sales taxes and property taxes, you may need to file a Joint Tax Application with the Arizona Department of Revenue.
Our Attorneys Can Help You Form a Nonprofit Corporation
Our goal is to help you understand all legal issues your nonprofit corporation is facing and represent your interests throughout any regulatory matter, transaction, or legal dispute in which you are involved. Contact the offices of Provident Law® today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona nonprofit corporation attorney about your legal matter.