Nonprofit organizations raise money similarly to for-profit organizations. However, the money raised is not used to benefit the founders of the organization but goes towards furthering the nonprofit’s cause or in other words, the organization’s mission statement.
There are over 1 million nonprofit organizations or public charities in the United States and approximately 4,600 charitable nonprofits in the state of Idaho. Some of the most popular Idaho nonprofits are Make A Difference Now, Orphan Acres Inc., and Lee Pesky Learning Center, Inc.
Starting an Idaho nonprofit organization means filling in the relevant forms and submitting them to the relevant government agencies. Once all your paperwork has been filed with the relevant government agencies, it could take anywhere between two weeks to three months to get the nonprofit up and running.
Some of the benefits of starting an Idaho nonprofit include tax exemption, credibility with donors, and limited liability protection.
The following step-by-step guide will give you an idea of what it entails to start an Idaho nonprofit corporation.
1. Select a name for your organization
The first step in starting a nonprofit organization in Idaho is to decide on a name for your cooperation. It’s important to give the name of the organization considerable thought as it establishes your nonprofit’s brand and image and is also essential for formal state incorporation.
Consequently, the legal name of the nonprofit should not conflict with any other existing organizations registered with the state of Idaho. The name should also be available and meet state requirements.
Additionally, in the state of Idaho, any business corporation name, even a nonprofit name, must include a word that designates its structure, such as Company, Limited, Corporation, Inc., or a similar appropriate abbreviation of those words.
Furthermore, if you plan on using the designation “Company” or the abbreviation of the word company, the word “and” cannot be before company, nor can any symbols representing the word “and” be used before the word “Company.”
One of the best ways of ensuring that you’ve chosen an available name for your Idaho nonprofit is to do a business entity search on the Idaho Secretary of State website.
2. Nominate an Idaho registered agent
One of the requirements for starting an Idaho nonprofit organization is to recruit or nominate a registered agent in Idaho.
Registered agents are also referred to as statutory agents or service of process agents. Irrespective of the different names that are used to describe these individuals, their primary role is to receive important legal documents and paperwork on behalf of the nonprofit organization.
This is especially in the event the nonprofit is being sued by an individual or business entity. The registered agent will need to accept the legal summons and all legal documentation on the organization’s behalf.
You may nominate anyone as a registered agent for your Idaho nonprofit; however, the individual must meet the following requirements:
- They must have a physical address in the state of Idaho
- They must be a citizen of the state of Idaho
- They must remain available during normal working hours
- They must be over the age of 18
While most nonprofit corporations choose to nominate an individual on the board of directors, you may also nominate yourself as a registered agent of your organization.
3. Recruit your board members
The next step in the process of starting a nonprofit in Idaho is recruiting your Board of Directors. Directors are basically tasked with governing a nonprofit’s operations and must be present at board meetings. So the directors need to be committed to the cause and also its ultimate success.
As per Internal Revenue Service requirements, you need to recruit at least three individuals unrelated to each other to be the directors of the Idaho nonprofits. The only exception here is if you plan on starting a religious corporation, and in this case, you need to recruit at least one director for your corporation.
Additionally, directors must meet the following requirements:
- Must be an individual and member of the Cooperative Corporation
- There are no residency requirements for directors in Idaho
- The default term for directors is one year. However, this may be extended up to five years
- A committee should have at least two directors
Additionally, the state of Idaho requires the board to appoint officers. The officers will be the president, secretary, and treasurer.
Aside from this, you’ll still need to recruit at least one incorporator who will sign the formal Articles of Incorporation.
4. Consent to bylaws and conflict of interest policy
Prior to filing Articles of Incorporation, you need to compile two other essential documents, which are:
- Conflict of interest policy
While both of these documents do not need to be filed with the state, copies of both documents will be needed when applying for 501(c)(3) tax-exempt status with the IRS.
The bylaws are the rules used by directors and officers to oversee the operations of the organization.
The Conflict of Interest Policy is the rules set down to oversee the decisions made by the board of directors or officers.
Ultimately, the Conflict of Interest Policy is put in place to ensure that all decisions made by the board are made to benefit the nonprofit organization‘s cause and not the members’ personal agendas.
5. Select an Idaho nonprofit startup corporation structure
There are many types of nonprofits in the nonprofit sector, but they all fall under one of the following organizational structures:
- Mutual benefit corporations: This type of nonprofit corporation is a type of organization similar to other mutual benefit corporations found in common law nations. They work for the greater good of a select group and not the general public.
Mutual-benefit corporations normally raise money by charging their members annual or monthly dues. The funds are then used to benefit the paying members. Unions are an example of a mutual benefit organization. These corporations may or may not opt for state and IRS tax-exemptions.
- Public benefit corporations: Public benefit NPOs are created for charitable purposes and are the most common type of nonprofit. They are meant to benefit a segment of the public or a specific community.
Some of the types of charitable organizations that fall into this category are educational programs, social services, and artistic endeavors.
- 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
In order for any nonprofit to be registered in the state of Idaho, they will need to file the Articles of Incorporation with the state. Additionally, when filing Articles of Incorporation, ensure that they have a clear purpose and dissolution section, making you eligible to apply for 501(c)(3) tax-exempt status.
Your Articles of Incorporation must include the purpose for which the organization is formed and must be restricted to one of the following categories:
- Preventing cruelty to animals or children
- Fostering national and international amateur sports competition
- Testing for public safety
The dissolution is basically a statement or declaration of what your nonprofit’s assets are being used for and what will happen to the organization’s assets if the nonprofit were to be dissolved.
Additional information needed in your Articles include:
- Your nonprofit’s name
- The name and address of each incorporator
- The names and addresses of the initial directors
- Information pertaining to the appointment of the registered agent
- Whether the organization has members are not
The Idaho Secretary of State contains an Articles of Incorporation Form or template on its gov website, which can be used to create your nonprofit organization and file your articles online.
7. File an initial report
You do not need to file an initial report for your nonprofit in the state of Idaho.
8. Secure an EIN (Employer Identification Number)
In order to run a successful nonprofit in the state of Idaho, you’re required to apply for an EIN.
An EIN is an Employer Identification Number which is often referred to as a Federal Tax Identification Number. The purpose of an EIN is for the federal government to identify a business entity. Essentially, it’s a social security number for your nonprofit organization in Idaho.
The EIN is beneficial in the following areas:
- To pursue federal and state tax exemption
- To open a business bank account for your nonprofit
- To hire employees for your nonprofit organization
To apply for an EIN, you need to make use of IRS Form SS-4 from the Internal Revenue Service and file the form online.
Further reading and guidance may be found on the IRS website: IRS Pub 1635: Understanding Your EIN.
9. Apply for federal tax exemption
The next step in getting your Idaho nonprofit organization off the ground is obtaining federal income tax exemption from the IRS which means your nonprofit will be a tax-exempt organization. You need to use IRS Form 1023 to complete your application under the Internal Revenue Code.
Alternatively, if your organization is a smaller nonprofit or small business, you may be eligible to file Form 1023-EZ, a shorter and simpler application form.
To have eligibility for 501(c)(3) tax exemption, you need to have already undertaken the following actions:
- Elected at least three directors unrelated to each other
- Adopted the Bylaws and Conflict of Interest Policy
- Obtained an EIN
- Filed the Articles of Incorporation with required provisions with the state of Idaho
The Internal Revenue Service website contains the necessary information for completing and filing your forms online.
Once your federal tax exemption application has been approved, you’ll receive a determination letter from the IRS stating that your nonprofit is one of the existing organizations that are exempt from federal taxes.
10. Apply for Idaho state tax exemption
After receiving your determination letter from the IRS, your nonprofit is automatically exempt from Idaho income tax.
However, you may still be liable for the tax on unrelated business income. To receive an exemption from state sales tax, you may proceed to the Idaho State Tax Commission website.
11. Other applicable permits and licenses
Nonprofits in Idaho are not required to purchase a general, statewide business license to carry on with business as usual. However, the licensing requirements may differ between cities and counties; therefore, it is advisable to reach out to your town and county business licensing departments and read through their compliance guide.
Additional state registration and reporting requirements
While many other states require you to register your nonprofit with the state before undertaking charitable solicitation, Idaho is not one of them. So you do not need to register in order to conduct fundraising or solicit donations from any member of the state. Further information may be found on the Idaho Office of the Attorney General website.
12. Submit an annual report
Nonprofits are required to submit annual reports in the state of Idaho in order to keep the organizations in good standing.
The annual reports offer updates or confirm your nonprofit’s basic information, including the nonprofit’s address and address and other details of the registered agent. Once you’ve completed your annual report, you should go to the Secretary of State‘s business portal and file it online.
Costs of starting a new nonprofit in Idaho
The following filing fees are applicable for all nonprofits in Idaho:
- Articles of Incorporation: $30 + optional $20 expedite fee
- Tax exemption application 501(c): $275 or $600 IRS fee
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.
One of the best ways to raise funds for you Idaho nonprofits is to make your organization credible. The best way to do this is to follow the federal and state laws by filing the necessary documents and ensuring that you are complying with the law to get your nonprofit registered. Once the nonprofit organization is registered, you’ll be able to solicit donations from individuals, business entities, and anyone in the state of Idaho.
This is basically an assessment or way of determining if the unfulfilled need really is a measurable or actual need to the problem your organization hopes to solve. It’s normally a business exercise; however, it’s essential to nonprofit organizations as they tend to want to resolve society’s largest problems.
A nonprofit executive director plays a crucial role in the organization. Primarily, their function is to bring about change and promote the nonprofit organization‘s growth. However, they may also inform the board of staff changes, plan and prepare meeting structures, and supply the board with the technology and tools it needs to significantly impact the community.
Your nonprofit’s business plan is essentially the foundation of your corporation. It details who, what, where, when, and how you are going to bring about the changes you see are needed. It is necessary and effectively a blueprint of how your organization will be run.
Once your organization has applied for federal tax exemption and been approved, you’ll receive a letter from the IRS stating that you are a 501(c)(3) charitable organization. This basically means that you are now able to offer tax deductions to your donors or that all donations solicited by your nonprofit are tax-deductible.