Connecticut is home to a total of 23,170 nonprofit organizations. Unlike for-profit corporations, nonprofits or public charities are intended to improve the quality of life for people on various levels. Therefore, nonprofits in Connecticut are not intended for financial gain but to meet an unmet need in the community and advance the public interest.
Staring a nonprofit corporation in Connecticut has many advantages like:
- Giving your organization credibility
- Perpetual existence
- Access to grants
- Tax exemption
- Discounted prices on postage services
Getting your Connecticut nonprofit up and running can take approximately two weeks to three months until 50c3 status is granted. While Connecticut has various types of nonprofits, some of the most successful existing organizations in Connecticut are Smart Kids With Learning Disabilities, Inc, HonorBound Foundation Inc, and Project Precious Rescue Inc.
1. Select a name for your organization
After establishing the purpose of your nonprofit and what you hope to achieve, it’s time to decide on a name for the nonprofit corporation.
The name of your organization must comply with Connecticut naming requirements and should preferably be a name that is easy to search.
To establish whether the name is available or not, refer to the Connecticut Secretary of State – Commercial Recording Division name search.
Additionally, the Connecticut nonprofit name must adhere to the following guidelines:
It must include the word, Company, Incorporated, Inc, and Ltd
It should be different from any other company, organization, or business n the state of Connecticut.
If you plan on creating a website for your organization at some point, you may also want to check the web domain availability.
2. Nominate a Connecticut registered agent
Your Connecticut nonprofit needs to nominate a registered agent. This is required by law.
Registered agents serve an important purpose within the nonprofit structure: to accept legal documents and communications from the state on the organization’s behalf.
You may appoint anyone as a registered agent, including the founder of the nonprofit or an employee of the organization.
However, they must meet the requirements below:
- Must be a resident of Connecticut
- Must have permission to conduct business in the state
- Must be over 18
- Must have a registered street address
- Must remain available during business hours
3. Recruit your board members
Nonprofits in Connecticut are required to choose a Board of Directors. The Board of Directors would include a minimum of three directors and a few officers.
The role of the Board of Directors is to oversee the organization’s operations. In addition to choosing directors, the board will need officers to fulfill the roles of president, secretary, and treasurer.
Each of these officers will have individual responsibilities and authorities within the organization.
Connecticut nonprofits must have an organizational structure that includes:
- At least three directors who have no relation to each other
- A president
- A secretary
- A treasurer
4. Consent to bylaws and conflict of interest policy
All Connecticut nonprofits that plan on applying for 501(c)(3) tax-exempt status will need to have two documents in order:
- Conflict of Interest Policy
The Conflict of Interest Policy is made up of rules and regulations set aside to govern the organization in a fair and just manner. This policy ensures that all decisions that are taken by the board align with the organization’s mission and purpose instead of serving the personal agendas of the organization’s members.
The Bylaws are a rundown of the rules under which the organization must abide, or in other words, the operating procedures of the Connecticut corporation.
Both these documents must be compiled when the first board meeting takes place and when the officers and directors are appointed.
5. Select a Connecticut nonprofit startup corporation structure
- Public benefit corporations: Public benefit NPOs are developed for charitable causes and act as social welfare organizations. Public benefit corporations involve religious and charitable organizations developed to bring about public and social good.
- Mutual benefit organizations: These organizations are similar to other mutual benefit organizations found in common law nations. These corporations may or may not choose to exercise their right to apply for state and Internal Revenue Service tax-exemptions.
- 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 nonprofit corporations are created solely for religious purposes, such as ministries.
6. Prepare and file nonprofit Articles of Incorporation
All Connecticut nonprofit organizations must create and file a nonprofit Certificate of Incorporation with the Connecticut Secretary of State. Some of the information required in your certificate of incorporation includes:
- Your nonprofit’s name
- Your nonprofit statement of purpose
- The address and name of your registered or statutory agent
- Specific provisions required for state and federal tax-exempt purposes
You’ll find the nonprofit Certificate of Incorporation form or Form CIN-1-1.0, located on the Connecticut Secretary of State website. You may use this form to create a nonprofit corporation.
Feel free to follow the instructions provided for the Certificate of Incorporation form, and once completed, you may submit the form online to the following mailing address:
Commercial Recording Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
When forming a nonprofit corporation in Connecticut, your articles need to include a minimum amount of information in order to have your nonprofit approved.
However, the form does not include the language required by the Internal Revenue Service in order to qualify for federal tax exemption. To ensure that you have eligibility for 501c3 tax-exempt status, your articles need to include specific language as follows:
- A declaration that your organization will not be engaging in prohibited political or legislative activity
- A statement of purpose meeting Internal Revenue Service criteria
- A statement disclosing what will happen to the nonprofit’s assets in the event of dissolution
For further reading and guidance, please take a look at the IRS website IRS publication 557.
7. File an initial report
All Connecticut nonprofits must file an initial report after filing the nonprofit Certificate of Incorporation.
The initial report must be filed with the Connecticut Secretary of State Commercial Recording Division using the Organization and First Report Form. The form should be completed and filed online.
8. Secure an EIN (Employer Identification Number)
Nonprofit corporations in Connecticut must apply for an EIN. An EIN is an Employer Identification Number that allows you to manage your nonprofit’s finances effectively and also apply for federal and state tax exemptions. Aside from that, it makes certain aspects of running a nonprofit much easier, such as:
- Opening a business bank account
- Submitting 990 returns to the IRS
- Applying for 501(c)(3) status
- Hiring employees for your nonprofit
After forming your Connecticut nonprofit, apply for a federal EIN, free of charge from the IRS. The form required is IRS Form SS-4. You may choose to apply online, and if so, you’ll receive your EIN immediately.
9. Apply for federal tax exemption
After forming a nonprofit organization, you need to attain federal tax exemption.
In order to do this, you must file Form 1023 with the IRS. Form 1023 is the relevant application for recognition of exemption and this falls under section 501(c)(3) of the Internal Revenue Code.
Advantages of obtaining federal tax-exempt status in Connecticut include:
- Nonprofit credibility
- Exemption from income, sales, and property taxes
- Eligibility for grants
- Tax deductions for donors
If your nonprofit in Connecticut is a small business, you need to file Form 1023-EZ.
In order to be eligible to apply for federal income tax exemption, your Connecticut organization must meet the following requirements:
- Adopt Conflict of Interest Policy and Bylaws
- Nominate a minimum of three directors unrelated to each other
- Have an EIN
- Must be registered as a nonprofit with the state of Connecticut
Once your organization has met these conditions, go ahead and apply with the IRS or file electronically via pay.gov
After the application is accepted, you’ll receive a determination letter from the Internal Revenue Service. The determination letter will specifically state that your Connecticut nonprofit has obtained tax-exempt status or is an exempt organization.
10. Apply for Connecticut state tax exemption
After receiving your determination letter from the IRS, youR Connecticut nonprofit is automatically exempt from state sales taxes.
However, you still need to make an application for exemption from state income tax with the Connecticut Department of Revenue Services.
In order to apply, you’ll need to submit a copy of your Internal Revenue Service determination letter and complete and submit Form REG-1.
11. Other applicable permits and licenses
Depending on the activities you plan on carrying out, certain licenses and permits may be required in the state of Connecticut.
To confirm, please refer to Connecticut’s License Info Center (CLIC). Check the section titled: Starting a business checklist to determine whether you need a license to conduct nonprofit activities in the state of Connecticut.
Additional state registration and reporting requirements
If your goal is to raise funds and spearhead various fundraising activities, then you need to check with the Connecticut Attorney General before doing so.
This is because there may be additional reporting and registration requirements for charitable solicitation for nonprofits in the state of Connecticut. The ideal way to ascertain this is to log on to the Connecticut Attorney General‘s website for additional rules and requirements.
12. Submit an annual report
Once a nonprofit is up and running, you’ll still need to comply with state rules and regulations. One of those requirements is submitting an annual report for your nonprofit in Connecticut.
The annual report will need to be submitted to the Connecticut Secretary of State – Commercial Recording Division. The annual report is due by the registration anniversary date, and the only nonprofits that are exempt from annual reports are religious corporations and statutory trusts.
Any member of the nonprofit may file the annual report as long as they have the authority to do so. The annual report for your Connecticut nonprofit may be filed online.
Costs of starting a new nonprofit in Connecticut
The following is a list of filing fees for nonprofits in Connecticut.
- First Report: $50
- Certificate of Incorporation: $50 + optional $50 expedite fee
- Tax exempt status – 501(c): $275 or $600 IRS fee
- Connecticut charitable registration: $50 ($0 if exempt)
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.
The National Council for Nonprofits is basically a trusted resource for charitable organizations and not private foundations in the United States. The council shares proven practices identify emerging trends, and assists people by promoting solutions that benefit charitable nonprofits and the communities they serve.
After starting a Connecticut nonprofit, you may choose to serve a certain position. In this case, you certainly can pay yourself a salary, within reason as long as it is reported to the Internal Revenue Service. Ultimately, the remuneration you are receiving must be comparable with other salaries and on par with similar organizations.
Nonprofits are not owned but founded. So while they have similarities with private organizations and may form partnerships with others that share the vision, they do not exist to make a profit. Therefore, your mission statement must explicitly state the purpose of your nonprofit.
Once your nonprofit organization is up and running in Connecticut, you’ll still be required to maintain it. A part of maintaining a nonprofit includes knowing the:
- Filing fees and forms that need to be submitted
- Best practices needed in order to have a successful nonprofit corporation
- What’s required to solicit funds
- Federal tax-exempt status requirements
The nonprofit compliance guide will help you understand what is required for your nonprofit to have a long and successful run.
Even if you plan on starting an organization in the nonprofit sector, you still need a business plan. This is because it lets possible donors know what you hope to achieve and ultimately join forces with you.
So the business plan will help you meet your nonprofit’s goals and purpose much quicker. You should also seek legal advice before making any permanent decisions pertaining to your nonprofit, the same as you would do when starting a for-profit corporation.