Nonprofit organizations are formed to fulfill unmet needs in the community. These nonprofit corporations exist to serve the organization’s mission and are not intended for monetary gain. Therefore, all proceeds from goods and services sold are placed back into the organization. Some of the advantages of starting a nonprofit corporation are:
- Remaining in existence long after founders leave
- Tax-exempt status
- Protection from personal liability
- Grants eligibility
In order to receive your 501c3 tax-exempt status and have your organization up, and running will take anywhere between 2 weeks to 3 months in Alaska. Here’s how to go about starting a nonprofit in Alaska.
1. Select a name for your organization
There are many steps to starting a nonprofit organization in Alaska. One of the first steps is ruling out a for-profit organization. The next step is to name your nonprofit corporation. The name of the nonprofit must comply with Alaska naming requirements and should also be easily searchable by potential donors and members.
Additionally, the name of your nonprofit must meet the following requirements:
- Your nonprofit’s name must include the appropriate designation, such as corporation, incorporated and unincorporated
- It should not contain any words that may be considered a violation of local laws
- It should not contain words like “engineer” unless your organization has the appropriate license
- The name of your nonprofit should also not suggest that it is created for any other purpose other than what is described in the Articles of Incorporation
- Must be distinguishable from other businesses in the state
Refer to the Department of Commerce’s official guidelines on naming your Alaska nonprofit. To check the availability of the name, go to the Alaska Secretary of State or the state of Alaska website and perform a name search.
2. Nominate an Alaska registered agent
Every nonprofit organization in Alaska needs to have a nominated Alaska registered agent.
The registered agent is also referred to as a statutory or resident agent and is a business entity or individual responsible for accepting or receiving important legal documentation on your nonprofit’s behalf.
Ultimately, the designated individual is the nonprofit’s point of contact with the state. The Alaska registered agent must meet the following requirements:
- Must be a resident of Alaska or a registered agent service
- Must be over the age of 18
- Must have a physical or street address in Alaska
- Must make themselves available during normal office hours to receive legal documents on the nonprofit’s behalf.
You may elect any individual within the organization to serve as the Alaska resident agent, including yourself.
3. Recruit your board members
The Alaska nonprofit needs board members. The board in Alaska must include:
At least three directors not related to each other
The board members, also referred to as the Board of Directors chosen for the Alaska nonprofit, play a crucial role in the success of the organization. Some of the responsibilities of the board include:
- Acknowledging and resolving conflict of interest
- Generating and maintaining a positive image to the public
- Keeping the organization’s operations above board
- Generating funds/Maintaining financial stability
- Distributing funds appropriately and in line with the nonprofit’s purpose
- Recruiting new members
- Upholding the nonprofit’s mission
4. Consent to bylaws and conflict of interest policy
Every nonprofit organization needs to adopt bylaws and a conflict of interest policy.
The bylaws contain the procedures and rules that the nonprofit is going to use for holding board meetings, electing directors and officers, and taking care of all other corporate formalities required in the state.
The conflict of interest policy is a collection of rules laid down to ensure that all decisions made by the Board of Directors benefit the organization’s cause and not the agendas of individual members.
A copy of the bylaws and conflict of interest policy does not need to be filed with the state. However, it should be kept on file and used as your nonprofit’s internal operating manual.
5. Select an Alaska nonprofit startup corporation structure
There are various types of nonprofit organizational structures in Alaska as follows:
- Mutual benefit corporations: This type of nonprofit corporation is a type of organization similar to other mutual benefit corporations found in common law nations. These corporations may or may not opt for state and IRS tax-exemptions.
- Public benefit corporations: Public benefit NPOs are created for charity purposes and act as a civic league or social welfare organization. Public benefit corporations include religious and charitable organizations formed to generate public and social good.
- Mutual benefit common interest development corporations: These are the nonprofit formations created under the Davis Stirling Common Interest Development Act to administer common interest development, such as a homeowner’s association.
- Religious organizations/corporations: These nonprofits are solely for religious purposes, such as a church.
6. Prepare and file nonprofit Articles of Incorporation
Every Alaska nonprofit must file Articles of Incorporation. The purpose of the Articles of Incorporation is to document when and where the nonprofit was created and make a note of other information that is important to verify the organization’s existence.
In order to be eligible to apply for tax-exempt status for the nonprofit in Alaska, your Articles of Incorporation must state the following:
The Alaska nonprofit’s purpose must be limited to one or more of the following categories:
- Preventing cruelty to animals or children
- Fostering national or international amateur sports competition
- Testing for public safety
You must state what the assets of the nonprofit are going to be used for, and in the event that the organization is dissolved, what happens to the assets.
In order to qualify for tax-exempt status in Alaska, the assets of the nonprofit organization can only be used for the purposes approved under section 501c3.
Additionally, the Articles of Incorporation can contain a provision that limits the personal liability of the nonprofit director for monetary damages for the breach of fiduciary duty as a director.
State of Alaska Corporations Section
P.O. Box 110806
Juneau, AK 99811-0806
You’ll need to submit two copies of the Articles of Incorporation. The first copy will be stamped as “filed” from the date of filing and kept in the commissioner’s office. The second copy will be attached to a certificate of incorporation and returned to you at a later date.
7. File an initial report
8. Secure an EIN (Employer Identification Number)
Your EIN or Employer Identification Number is also referred to as a Federal Tax Identification Number and is often used to identify a business entity. Ultimately, it is a Social Security number for your nonprofit.
The Alaska nonprofit EIN is required whether you plan on hiring employees or not. The benefits of an EIN include:
- Being used for Federal and State tax purposes (990 returns)
- Hiring employees
- Opening a business bank account
Use IRS Form SS-4 to apply. You may submit the form online or via mail. If done online, you’ll receive your EIN immediately. Additional guidance on understanding and obtaining your EIN may be found in this IRS EIN Guide.
9. Apply for federal tax exemption
Obtaining federal tax status means applying to the IRS. In order to do this, your nonprofit must be formed for the right reasons and in the right way, in terms of IRS requirements.
There are more than two dozen types of exempt nonprofits recognized by the Internal Revenue Service, and most of them are private 501(c)(3) status for private and public charities.
Suppose you’re planning on becoming a 501 C3 tax-exempt organization. In that case, your Articles of Incorporation must include specific language required by the IRS, which basically ensures that your organization’s activities are limited to one or more recognized exempt purposes.
Once you receive a federal income tax exemption, you won’t be required to pay the state income tax in Alaska. You may also qualify for Alaska property tax exemption if your nonprofit is used exclusively for charitable, religious, hospital, cemetery, or educational purposes. Nonprofits in Alaska are also not required to pay state sales tax.
Before applying for federal tax exemption in Alaska, ensure that your nonprofit meets the following requirements:
- Has an EIN
- Has at least three directors
- Has already filed Articles of Incorporation
- Has adopted bylaws and conflict of interest policy
The benefits of being a tax-exempt organization in Colorado are:
- Credibility for your nonprofit
- Income, property, and payroll taxes
- Exemption from taxes on various taxes such as sales, federal
- Discounts on postage rates
- Access to grants
- Being able to give tax deductions to donors
File Form 1023 under the Internal Revenue Code to apply for federal tax exemption or Form 1023-EZ if your nonprofit is a small business. Instructions for completing these forms may be found here on the IRS website.
The IRS will then vet your application, and if your application has been approved, you’ll receive a determination letter. The determination letter will explicitly state that your Alaska nonprofit is exempt from federal taxes under section 501c3.
10. Apply for Alaska state tax exemption
Alaska nonprofits that have received their IRS determination letter making them exempt from federal taxes do not need to apply for state tax exemption.
This is because Alaska does not have a state-level sales tax. For further information, refer to the State of Alaska Department of Revenue.
11. Other applicable permits and licenses
Nonprofits in Alaska are required to comply with the Alaska Department of Revenue – Charitable Gaming rules when hosting lotteries, raffles, bingo, and various other charitable games.
Additional state registration and reporting requirements
When it comes to charitable solicitation or fundraising activities, the laws differ from one state to the next.
However, in the state of Alaska, you need to refer to the Alaska Attorney General website or the Alaska Department of Law Consumer Protection Unit for information about the fundraising and registration requirements for Alaska nonprofits.
You may also consult the IRS Compliance Guide for further direction if you plan to raise funds or are considering a fiscal sponsorship for your Alaska nonprofit.
12. Submit an annual report
In addition to filing the initial report, Alaska nonprofits should provide a biennial report every year by no later than July 2 in order to remain in good standing with the IRS. The biennial report should contain the following information:
- Nonprofit’s name
- Name of service of process agent/registered agent
- Names and addresses of all board members
Costs of starting a new nonprofit in Alaska
- Alaska Articles of Incorporation: $50
- Alaska business license: $50
- Application for 501(c)3 tax-exemption: $275 or $600 IRS fee
- Alaska Charitable Registration: $40
Payments must be made via pay.gov
After you’ve started your nonprofit, there are a few necessary steps that you should take to keep your organization running smoothly. Let’s take a closer look at them below:
Open a business bank account
- Maintain accounting and tax filing
- Ensure that your personal assets are kept separate from your nonprofits’ assets
To open a bank account, you will need to provide:
- Your EIN
- A copy of your articles of incorporation
- A copy of your organization’s bylaws.
Hire a business accountant
- Simplify payroll and bookkeeping
- Prevent your nonprofit from avoiding penalties and tax errors
- Manage your nonprofit’s funding
- Focus on growing your nonprofit
- Manage risks
You may opt for General liability, Personal liability, or Worker’s compensation insurance.
Build a website
As we mentioned earlier, you may want to create a website for your organization to legitimize your business or give it more credibility. A dedicated website is also one of the best ways to share your nonprofit’s vision, mission, and story with supporters. Consequently, it’s also a great way to announce upcoming events and goals.
Sign legal documents
One aspect that tends to get overlooked is signing legal documents in your personal capacity instead of as an authorized representative of your nonprofit.
If you’ve appointed yourself as a registered agent of the nonprofit, then the following tips will help avoid personal liability:
- State the registered name of your nonprofit
- Use your name and signature
- State your position/role in the organization as its authorized representative
When signing legal documents on behalf of the nonprofit, it is important that you do so in your capacity as the registered agent, as opposed to your capacity as an individual.
Example: Instead of signing your name only, state the name of the nonprofit and then your name and position within the organization before signing.
Yes, if starting a nonprofit in Alaska, you’ll need to get a business license via the Alaska Division of Corporations, Business, and Professional Licensing. Additionally, having a good business plan for your Alaska nonprofit is highly recommended.
Yes, having a mission statement for your nonprofit helps to clarify its purpose and may motivate both staff and potential donors to give towards the cause. The nonprofit’s mission statement may be compiled as part of the bylaws or Articles of Incorporation.
The choice is ultimately yours. But if there are existing organizations that share your vision, one of the options is to go into partnerships or join with them in serving your cause. Since they are already in existence, they should have crucial operating functions in place.
Irrespective of how good your research skills may be, it is recommended that you seek legal advice when starting an Alaska nonprofit. This will ensure that you comply with the state f Alaska’s laws pertaining to the formation of nonprofit organizations. Legal advice is also crucial in keeping your nonprofit’s dealings above board throughout your nonprofit’s existence.
Aside from filing fees, you’ll need to maintain your Alaska nonprofit by facilitating the costs year by year. Depending on the nonprofit’s activities, the costs may be higher or lower from one year to the next. Nonprofits that accept donations must pay $40 each year to maintain the “charity” status. Biennial reports cost $25 per year, and your Alaska business license will cost you $50 per year moving forward.