How to Start a Nonprofit in Illinois
Introduction
Before starting a nonprofit organization, it is important to know the steps involved. The process can seem daunting at first, but if you take your time and follow each step in order, you’ll soon be ready to apply for nonprofit status.
Decide What Kind of Nonprofit you Want
There are many different types of nonprofits, and each type is used for a specific purpose. It’s important to know the difference between them so you can decide which one best suits your mission and goals. The following is an overview:
- 501(c)(3) organizations – These are the most common type of nonprofit, including charities and foundations. The IRS defines these types as religious, educational, scientific or charitable organizations that provide services to the public good without expectation of profit.
- 501(c)(6) corporations – Professional associations are another common example of this category; they include trade groups like chambers of commerce or professional schools like medical schools that operate with a broader scope than individuals’ interests but do not offer services directly to the public at large (like other 501(c)(3) organizations).
- Other types include political entities such as PACs (political action committees), labor unions, and social clubs like fraternities and sororities; all have very specific rules regarding their formation process so be sure to check out IRS guidelines before starting your new organization!
Form a Board of Directors
A board of directors is the governing body of a nonprofit organization. A formal board of directors has authority over the business affairs and financial management of an organization but does not take responsibility for day-to-day operations.
The board sets policies and establishes a vision for the organization, hires staff, approves budgets and audits, oversees fundraising efforts, reviews policy changes proposed by management, and makes decisions regarding legal issues faced by the nonprofit as they arise.
Determine if you need to Register with the Illinois Attorney General’s Office
If you are a new nonprofit organization, you will need to register with the Illinois Attorney General’s office. The attorney general provides information on its website about how to register your nonprofit and what documents are needed.
For example, if you are already registered in another state, it is not necessary for you to register in Illinois because registering twice would be redundant. If you are a religious organization (such as a church or synagogue), the attorney general may not require that you register with them at all because they do not regulate religious organizations.
Bylaws and Mission Statement
A mission statement is a short paragraph that describes the purpose of your organization. It should be concise, clear, and persuasive in its message. For example: “The purpose of this nonprofit corporation is to provide support for families with children who have autism spectrum disorders.”
A by-law is a written set of rules that describe how an organization will operate and govern itself. Your non-profit’s bylaws must be consistent with state law, so you may want to consult an attorney when creating these documents if you are unsure about what they should include or what requirements they must meet.
File for Federal Tax Exemption
To apply for federal tax exemption, you must file Form 1023. However, there are a few things to keep in mind before filing—the form is long and complicated. You can save yourself some time and headaches by using Trademark Avenues’s services.
You can also hire an attorney or accountant who handles nonprofit filings regularly to complete the form for you (this will cost money). If you do choose this option, make sure whoever completes your application is familiar with Illinois nonprofit law!
Obtain a Federal Employer Identification Number
An Employer Identification Number (EIN) is a nine-digit number that the Internal Revenue Service (IRS) assigns to identify a business. You will need an EIN in order to set up your nonprofit and file taxes on behalf of your organization.
Open a Bank Account
Many banks offer free accounts, but you’ll need to provide a copy of your 501(c)(3) approval letter to get one.
Apply for credit cards in the organization’s name. This can be done through the same institution that provides your business account, or at another financial institution if you prefer. Once approved, these credit cards can be used as payment tools when buying equipment, supplies and other necessities.
Manage both accounts carefully by reconciling them regularly with receipts and invoices in order to avoid overdrafts on either account; keep them separate so no money from personal transactions ends up being deposited into the business bank account; use separate debit cards for each type of transaction, and report any fraudulent activity immediately so all charges can be reversed quickly without costing extra money unnecessarily.
Apply for State Tax-exempt Status
In order to start your nonprofit organization in Illinois, you will need to apply for state tax-exempt status. The first step is completing Form REG-1.
Form REG-1 is the application for Illinois tax-exempt status. It must be completed by a representative of your organization, who can be an officer or employee of your organization or an attorney representing it. Your representative must also sign the form and file it along with supporting documentation, such as articles of incorporation and minutes from meetings of its governing body.
The DOR accepts applications on a rolling basis throughout each year—you don’t have to wait until January 1st! You can send your application via postal mail or fax at any time during 2018; however, forms sent in by mail may take longer than those submitted electronically due to processing times involved in clearing items through postal systems across multiple states (this includes overnight shipments).
Apply for 501(c)3 Status
You may have heard of 501(c)3 status, but what does it mean? It’s a designation that allows nonprofits to be tax-exempt and therefore eligible for donations. The IRS uses Form 1023 to apply for 501(c)3 status, which can take months to process.
There are other ways to get the same tax-exempt status more quickly. You can apply easily by filling out Form 8720A, but you’ll need an existing organization in order for them to review your submission; if you don’t yet have an organization set up or incorporated in Illinois, consider using this method until then!
Once approved, you will receive a ruling letter confirming your status as tax-exempt under Section 501(c)(3) of the Internal Revenue Code—this makes it possible for your organization’s donors/sponsors/partners/funders to claim their contributions as charitable deductions on their taxes!
Takeaway
- Make sure you have a good idea of what you want to do.
- Make sure the people you involve in your nonprofit foundation are passionate about the same cause and will stay involved for the long haul.
- Get feedback from potential board members on your mission statement, constitution and bylaws, policies and procedures manual, marketing plan, fundraising plan and budget; make sure these documents reflect their input before going through with anything official (such as incorporation).
- Have an accountant help with paperwork/taxes/etc.; it will save time later on if he/she helps now instead of having to find one after everything is set up (which may take longer than just doing it right in the first place).
- Have a professional review all documents before filing them; this will ensure that everything is legally sound before being put into place so there won’t be any issues later down the road due to incorrect paperwork filed earlier on during this process
Conclusion
If you are passionate about making a difference in the world, start a nonprofit today. It may seem like a daunting task, but with this guide as your roadmap, it’s easier than you think! You will be well on your way to making an impact on society with just these few steps. Good luck!
