There are approximately 58,209 nonprofit organizations in the state of Georgia. Among the most popular of these organizations in the Georgia nonprofit sector are Sober Living America Inc, Next Generation Focus Inc, and Healing4Heroes™ Inc.
Nonprofit organizations unlike for-profit companies are considered public charities and are developed for the greater good of the community. Although the founder and employees of the nonprofit qualify for a salary based on time and effort put into the organization, this must be disclosed to the IRS, and all of the proceeds from fund-raising activities must be cycled back into the nonprofit to further the cause.
While the benefits of starting a nonprofit vary from state to state, some benefits remain across the board. For example, nonprofit organizations qualify for corporate federal income tax exemption. Therefore, they are exempt under both state and local tax law.
Ultimately, this tax-exempt status enhances the chances of investments to a nonprofit as potential donors are happy to donate to organizations that will help them decrease tax liability or ensure that their donations are tax-deductible. Additionally, nonprofit organizations in Georgia are allowed to solicit donations from both public and private grants.
Furthermore, when starting a nonprofit organization, the founders of the nonprofit are considered separate from the nonprofit itself. Therefore the burden of debt, fines, lawsuits, and other legal matters are taken off the founders’ shoulders. Employees and board members of a nonprofit entity qualify for limited liability.
Starting a nonprofit corporation in the state of Georgia can take anywhere between two weeks to three months, provided you have all your paperwork in order.
Follow this step-by-step guide to get your Georgia nonprofit up and running.
1. Select a name for your organization
One of the fundamental steps in starting a nonprofit organization in Georgia is choosing a name for your corporation. This should also be included in your business plan. The name of the nonprofit is one of the first things that members and donors will learn about your cause so ensure that it lets people know what your organization is all about.
The state of Georgia has the following naming guidelines:
- The nonprofit name must be under 80 characters
- The nonprofit name must include a designation such as a corporation, company, Inc., or limited or at least an abbreviation of one of these designations
- In the event that the nonprofit name includes words such as “bank” or “banking”, then written approval is required from the Department of Banking and Finance
- Additionally, if your nonprofit name includes words such as “fidelity,” “insurance,” or “assurance,” then once again, written approval is required from the Office of Insurance and Safety Fire Commissioner.
Refer to the Georgia Secretary of State’s official guidelines for additional guidance in choosing your Georgia nonprofit name.
2. Nominate a Georgia registered agent
Nonprofit corporations in Georgia are required to nominate a registered agent. The registered agent is also referred to as a statutory agent or service of process agent.
Their primary function is to accept legal documents and papers from the state on the organization’s behalf if it is ever sued.
You may appoint anyone as the registered agent, including yourself. However, the designated individual must meet the following requirements:
- They must have a physical street address in the state of Georgia
- The individual must agree to be the registered agent
- They must be at least 18 years of age or older
- The registered agent is also required to maintain business hours
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3. Recruit your board members
Your nonprofit’s Board of Directors is made up of directors and officers that will be nominated during the nonprofit’s first organizational board meeting.
Georgia nonprofits must recruit at least three directors who are not related to each other.
Additionally, you’ll need to nominate a secretary, president, and treasurer known as the officers of the Georgia nonprofit and have individual authorities and responsibilities.
The board’s responsibilities involve overseeing the operations of the organization and fulfilling a legal and practical role in the corporation.
Irrespective of whether you have an executive director, volunteers, or paid staff to handle the organization’s daily operations, the board still plays an essential legal role in the corporation.
- Some of the responsibilities of the Board of Directors include:
- Establishing priorities
- Defining the organization’s mission
- Crafting strategies and ensuring that the programs and plans discussed at organizational meetings are implemented
4. Consent to bylaws and conflict of interest policy
Your Georgia nonprofit needs two documents in order to have eligibility to apply for 501(c)(3) tax-exempt status.
The first document that your board should compile is the Bylaws that govern the operations of the nonprofit. It’s basically the corporation’s operating manual and should align with what’s contained in the Articles of Incorporation as well as Georgia state law.
Next, you need to adopt a Conflict of Interest Policy. This policy ensures that anyone in a key position or anyone in a position of authority to make decisions pertaining to the nonprofit will always do so in the organization’s best interest instead of their own personal interests.
Ultimately, the Conflict of Interest Policy is put in place to ensure that personal interests are set aside and the nonprofit’s interests are prioritized at all times.
When applying for 501(c)(3)’s tax exemption, you’ll be required to provide a copy of the Bylaws and Conflict of Interest Policy.
5. Select a Georgia nonprofit startup corporation structure
You may register various types of nonprofits with the state of Georgia, however, the most common organizational structure/s are listed below:
- Public benefit organizations: Public benefit NPOs are developed for charitable purposes and function as social welfare organizations. Public benefit organizations involve religious and charitable organizations developed to bring about public and social good.
- Mutual benefit organizations: These organizations are similar to other mutual benefit corporations 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
Every Georgia nonprofit corporation must file articles of incorporation with the Georgia Secretary of State Corporations Division. This should be done to establish your corporation and ensure that you are eligible to apply for 501(c)(3) tax exemption.
When filing Articles of Incorporation, they must include the following:
- The organization’s name
- The name and physical address of the corporation’s statutory or registered agent
- A statement declaring that the nonprofit “is organized pursuant to the Georgia nonprofit corporation code”
- The name and physical address of each incorporator
- The mailing address of the organization’s principal office
- Whether the corporation will or will not have nonprofit members
Additionally, your nonprofit organization must have certain specific language in the Articles of Incorporation to receive a 501(c)(3) tax-exempt status from the Internal Revenue Service.
This should include:
- A statement of purpose (as per your mission statement) meeting Internal Revenue Service requirements
- A statement declaring that your organization is not going to be engaging in activities that are unrelated to the exempt purposes contained in the Articles of Incorporation
- A dissolution clause stating exactly what the corporation’s assets are going to be used for and what will happen to the assets in the event of dissolution (which must be filed with the Georgia Attorney General)
There is no specific IRS form or template provided by the Georgia Secretary of State to file Articles of Incorporation. However, there is a detailed guide available by the Corporation’s Division. This will help you draft your articles and includes a sample form for your reference.
You should note that the sample form does not include the three clauses that the IRS requires. Therefore the tax-exempt language must be included in the article that you create as it is imperative and will affect your 501(c)(3) status.
Feel free to file online or via mail at the following address:
Office of Secretary of State Corporations Division
2 Martin Luther King Jr. Dr. SE
Suite 313 West Tower
Atlanta, GA 30334
When filing via mail you must submit a Corporation Transmittal Form. This is a separate document containing a list of all documents and forms contained in your Articles of Incorporation.
7. File an initial report
Georgia nonprofit corporations are required to file an initial report for the Georgia Secretary of State. You should use the Initial Annual Registration Form provided by the Georgia Corporations Division.
The form must be filed online within 90 days of incorporation.
8. Secure an EIN (Employer Identification Number)
An Employer Identification Number or EIN, as it is commonly referred to, is something that all Georgia nonprofits will need to apply for.
The EIN is essentially a nine-digit number that helps the IRS identify your organization. Think of it as a Social Security number for your nonprofit.
An Employer Identification Number is important when it comes to opening a business bank account, attaining tax exemption on both state and federal levels, and submitting 990 returns to the Internal Revenue Service.
In order to apply for your EIN, you should file Form SS-4 online.
Further information on obtaining your EIN may be found on the IRS website.
9. Apply for federal tax exemption
All Georgia nonprofit organizations must apply for federal tax exemption with the IRS. However, before your Georgia nonprofit can apply for 501(c)(3) status, the following requirements must be fulfilled:
- The Georgia nonprofit must have at least three directors
- Articles of Incorporation with all of the necessary provisions must have already been filed
- Bylaws and Conflict of Interest Policy must already be adopted
- Your Georgia nonprofit must have an EIN
Once these conditions have been met, you can go ahead and file for federal tax-exempt status by using Form 1023 as per the Internal Revenue Code.
Form 1023-EZ is recommended if your nonprofit is a small business (or anticipates earning under $50,000 per year)
Once the application is accepted, a determination letter will be sent to you by the Internal Revenue Service stating that you are exempt from federal taxes.
10. Apply for Georgia state tax exemption
All existing organizations with federal tax exemption in Georgia are automatically exempt from corporate tax, meaning it is an exempt organization. However, in order to obtain state sales tax exemption, you must file an application with the Georgia Department of Revenue.
For exemption from state income tax, attach your determination letter, including the letter of incorporation, to your tax returns and submit it to the Georgia Department of Revenue.
11. Other applicable permits and licenses
Depending on the county and city in Georgia where your nonprofit is located, business license requirements may vary. Contact your local licensing office to determine whether you are required to file for a business license for your Georgia nonprofit.
Additional state registration and reporting requirements
It’s highly likely that you plan on soliciting donations or conducting fundraising as a Georgia nonprofit, and in this case, you need to register for charitable solicitation with the Georgia Secretary of State. If your nonprofit is based outside of Georgia, but you will be accepting contributions and donations from residents of Georgia, or you plan to raise funds in any other way, you also need to register with the Secretary of State.
12. Submit an annual report
As per Georgia state law, all Georgia nonprofit corporations are required to file a Georgia annual registration each year with the Georgia Secretary of State, Corporations Division.
Annual reports for Georgia nonprofits are due between January 1 and April 1 each year. Refer to the Georgia Corporations Division annual registration page for instructions on how to file your annual report.
Costs of starting a new nonprofit in Georgia
The following filing fees are applicable for all Georgia nonprofits:
- Georgia Articles of Incorporation: $100
- Georgia Notice of Incorporation: $40
- Federal Tax exemption 501(c): $275 or $600 IRS fee
- Georgia Initial “Annual” Registration: $50
- Georgia Charitable registration: $35
You may file these fees with 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.
The Transmittal Information Form is a form that you need to complete and send in with your Articles of Incorporation. Aside from containing a rundown of all the documents you are submitting with your articles, it must update the state on your nonprofit name, the name and address of the nonprofit’s statutory agent, and of course, notice that you are publishing a Notice of Intent with your local newspaper.
While the state of Georgia permits nonprofits to have at least one board member or director, you may have some issues with the IRS. This is because the Internal Revenue Service rarely grants tax exemption to nonprofits with one board member. So it is better to have at least three to 25 board members to ensure that your federal tax exemption is granted without any issues.
A nonprofit corporation that offers fiduciary oversight, various administrative services, and financial management is considered a fiscal sponsor. They mainly assist new or struggling nonprofits to gain credibility to attract donors, even while the nonprofit is not yet recognized. So think of it as partnerships with recognized and credible organizations. So they basically take new nonprofits under their wing and help them get on their feet during the early stages of starting an NPO.
Building a successful nonprofit is not easy, but it is achievable if you prioritize certain aspects such as having a nonprofit that is:
- Focused on their mission
- Able to inspire and mobilize others
- Digitally savvy
- Listens and improves continuously
A nonprofit compliance guide is mandatory if you plan on running a successful nonprofit corporation. While you may overcome the initial hurdles and have been granted tax-exempt status, you’ll still need to comply with federal and state laws to keep your organization in good standing with the state. A compliance guide on hand will help you do exactly that.