The state of New Jersey is home to 51,224 successful nonprofit organizations. This nonprofit sector has a total of 656,544 people working for them and earns more than $80 billion in revenue per year.
There are many reasons why people choose to form nonprofit organizations instead of for-profit companies. However, they all have one thing in common in that these organizations are always formed for the greater good of human beings, be it on a state, federal or global level.
Nonprofit organizations enjoy various benefits such as limited liability, credibility with the IRS, accepting tax-deductible donations, and access to grants and funding from both government and private foundations.
It could take anywhere between two weeks to three months to start a nonprofit in New Jersey. The following article will show you a step-by-step guide on starting a nonprofit in New Jersey.
1. Select a name for your organization
When starting a New Jersey nonprofit, the first thing you need to do is pick a name for your organization. Every nonprofit requires a name, and the state does not just require it, but it’s for sponsors and donors to easily find your nonprofit. Ensure that the name of the nonprofit reflects the organization’s mission statement as well.
The New Jersey Statutes will provide guidance on naming a New Jersey-based business entity.
Additionally, the nonprofit name must be easily distinguishable from other organizations or business entities in the state of New Jersey. Conduct a New Jersey business name search to see if the name you are considering is still available for use. If available, you may choose to reserve it.
Having an online presence is critical to the success of your nonprofit organization, so ensure that you create a website once your nonprofit is up and running. In this case, you’ll want to ensure that the domain is also available.
Lastly, New Jersey nonprofit names need to include one of the following words or abbreviations: Corporation, Incorporated, A New Jersey nonprofit corporation
2. Nominate a New Jersey registered agent
Registered agents who are also referred to as a resident or statutory agents are tasked with receiving legal paperwork on a nonprofit organization’s behalf. Therefore, it is a requirement that every New Jersey nonprofit appoints a registered agent for their organization.
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The resident agent needs to meet the following requirements:
- The resident agent must have an in-state address
- The resident agent must hold regular hours of business
- The resident agent must be in charge of state filing and tax forms, legal notices, and service of process
You may appoint anyone as your New Jersey nonprofit’s registered agent, including yourself.
3. Recruit your board members
The next step in starting a New Jersey nonprofit is recruiting an incorporator responsible for signing and filing the Articles of Incorporation for the nonprofit organization. You’ll need to include at least one incorporator, but you may have more.
Thereafter, you need to recruit initial directors for the organization. The initial directors are considered stakeholders in the nonprofit, and they will oversee the operations of the organization.
According to the IRS, a nonprofit must have at least three directors who are not related to each other in any way. Directors need to be at least 18 years of age or older.
New Jersey directors do not need to be US citizens or New Jersey, residents. The term of service for directors is one year, and thereafter stakeholders will put in a majority vote to either re-elect the same directors or bring new ones aboard.
Lastly, you’ll need to recruit officers for your nonprofit organization. You need to select an officer to fulfill each of the following roles:
4. Consent to bylaws and conflict of interest policy
Adopting bylaws is an essential step in the New Jersey nonprofit startup process. The bylaws are your organization’s operating manual and are required to be consistent with the Articles of Incorporation as well as federal and state law.
The bylaws will need to be adopted when your organization has its first board meeting and selects the board of directors. The bylaws are essentially a roadmap for overseeing the organization’s operations or, essentially, your nonprofit’s management handbook.
It’s also required by law that you create and adopt a Conflict of interest policy. This policy will be acted upon when someone in a key position has competing interests or is making choices not for the benefit of the nonprofit organization but for their own personal gain.
The Conflict of interest policy is put in place to ensure that all decisions made for the nonprofit are always in the best interest of the nonprofit.
Prior to submitting an application for federal income tax exemption, the IRS will require that both the Conflict of interest policy and bylaws have been adopted and approved. Be sure to keep these documents safely on file for future reference.
5. Select a New Jersey nonprofit startup corporation structure
The following organizational structures or nonprofits are available in the state of New Jersey:
- Social and Recreational Clubs: Under the Internal Revenue Code, these types of nonprofits are described as a 501(c)7. They include country clubs, hobby clubs, garden and variety clubs, as well as amateur hunting and fishing and sports clubs.
- Trade and Professional Associations: These types of organizations are considered 501(c)6 under the Internal Revenue Code. They are usually business leagues and the likes. Some of the Trade and Professional Associations organizations are retail merchants associations, real estate boards, and Chambers of commerce.
- Civic Needs and Social Welfare Organizations: These organizations are considered 501(c)4 under the Internal Revenue Code. They are developed to improve the common good and overall welfare of people in the community. Some examples of civic leagues and social welfare organizations include downtown improvement associations, civic groups, and social action organizations.
- Charitable Organizations or Charities: These organizations are considered 501(c)3 under the Internal Revenue Code and are exempt from taxation. These organizations are formed for one or more of the following purposes:
- Religious, charitable, educational, literary, scientific
- Fostering national or international amateur sports competition
- Testing for public safety
- Prevention of cruelty to animals or children
Some examples of charitable organizations include food banks, daycare centers, mental health organizations, and environmental groups.
6. Prepare and file nonprofit Articles of Incorporation
Completing the New Jersey public records filing for new business entities is the next step in the process of forming your nonprofit in the state. This is also referred to as the Articles of Incorporation.
To attain tax exemption eligibility and apply for 501(c)(3) tax-exempt status in New Jersey, your articles must explicitly state the following:
The reason for the existence of the nonprofit must be declared in the Articles of Incorporation. You may think of this as your organization’s mission statement.
The dissolution is basically a declaration of the organization’s assets, what they are currently being used for and what should happen to the assets in the event that the nonprofit is dissolved. Most organizations choose to leave their assets or resources to another charitable organization in the event of dissolution.
Other additional information required in your Articles of Incorporation includes:
- The New Jersey nonprofit’s name
- The address of the nonprofit organization
- The effective date of the articles
- The duration of the nonprofit organization
- The address of the organization’s initial registered office, as well as the name and address of the registered agent
- The names and addresses of the trustees
The Articles of Incorporation may be completed online through the Division of Revenue’s online business formation webpage.
Once completed, you should submit your articles to the New Jersey Department of Treasury.
7. File an initial report
There is no need to file an initial report for a New Jersey corporation as it is not a state requirement.
8. Secure an EIN (Employer Identification Number)
Every New Jersey nonprofit needs to apply for an Employer Identification Number. The Employer Identification Number is referred to as an EIN and is used by the Internal Revenue Service to identify business entities in the state.
The EIN is essentially a Social Security number for the organization and allows you to open up a business account for the nonprofit, apply for federal tax exemption, and submit 990 returns to the IRS. It’s also useful when it comes to hiring employees for your nonprofit.
The EIN may be obtained free of charge from the IRS on the IRS website by completing and filing Form SS-4. You may file the form online, and this is the quickest way to obtain your EIN. However, ensure that you print it prior to closing the session as the IRS.gov website only operates during certain hours.
In addition to getting an EIN, you also need to attain a New Jersey state tax identification number within 60 days of filing as a new organization. You may register online with the New
9. Apply for federal tax exemption
Nonprofit organizations are not automatically exempt from federal income tax. Therefore, every New Jersey nonprofit will need to obtain tax-exempt status by applying to the Internal Revenue Service.
Instructions for completing the template Form 1023 and Form 1023-EZ may be found on the IRS website. Before you can apply or be eligible for 501(c)(3) tax-exempt status, your New Jersey nonprofit must have already fulfilled the following duties:
- Received an Employer Identification Number and New Jersey state tax identification number
- Adopted bylaws
- Filed the public records filing with the required IRS provisions
- Elected at least three directors not related to each other in any form or way
Once the IRS has received your application for tax exemption, it will be reviewed, and if there are no issues with the application, your request will be accepted.
This is when you’ll receive the IRS determination letter stating that you are one of the existing organizations in New Jersey that is exempt from federal income tax.
Obtaining federal tax exemption comes with various benefits such as limited liability, credibility with the IRS, and access to donations, grants, and funding from government and private foundations.
10. Apply for New Jersey state tax exemption
Organizations that have received the Internal Revenue Service determination letter are automatically exempt from business taxes.
However, your organization also needs to obtain a sales tax exemption. Complete Form REG-1E and file it with the New Jersey Department of Treasury-Division of Taxation to obtain an exemption from sales taxes.
11. Other applicable permits and licenses
Depending on the scope of the organization and the type of activities you plan on getting involved in, you may require additional business licenses and profits. Refer to the New Jersey online license and certification website for state license information.
Additional state registration and reporting requirements
New Jersey nonprofit organizations or charitable organizations that intend on fundraising or partaking in a charitable solicitation must register with the Division of Consumer Affairs Charities Registration Section. This is as per the Charitable Registration and Investigation Act, which is also referred to as the CRI Act.
12. Submit an annual report
New Jersey nonprofits must file an annual report with the Division of Taxation each and every year. The annual report is due no later than by the last day of the anniversary month of the nonprofit’s formation. The annual report may be filed online.
Costs of starting a new nonprofit in New Jersey
The following filing fees are applicable to all New Jersey nonprofits:
- Articles of Incorporation: $75
- Tax exemption application for 501(c) status: $275 or $600 IRS fee
- New Jersey charitable registration: $30 – $250
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.
All nonprofit organizations or public charities have the option to obtain tax exemption from the IRS. However, nonprofits are not obligated to apply for tax exemption, and if they don’t, they will be responsible for corporate, property, sales, and other taxes.
All of the information needed to create a nonprofit organization in the state of New Jersey can be found on the relevant government agencies such as the Secretary of State website, Division of Taxation website, and the New Jersey Department of Revenue and Enterprise Services. However, you are free to speak to a lawyer prior to forming a nonprofit organization.
An executive director is a member of the Board of Directors and has the powers assigned to them by the nonprofit’s bylaws. They are ultimately officers of the organization, and their tasks and authority vary from one organization to the next. The board members have the authority to change the executive director‘s powers and authorities at any point in time by adopting a resolution.
All nonprofits are required to have bylaws prior to applying for tax exemption. A nonprofit’s bylaws are the management handbook of the organization and helps to ensure personal liability protection for directors and avoid misunderstandings between directors, officers, and nonprofit staff. Although it does not need to be filed with the state, it must be kept and used as the operating manual of the organization.
There are many ways to raise funds for your nonprofit. You should start by letting people know exactly how their donations are going to be used to make a positive impact in the community. You can also research donors and promote fundraising efforts via word-of-mouth, social media, the Internet, and a brand ambassador for your nonprofit.