There are approximately 6,244 organizations in the North Dakota nonprofit sector. These organizations hire around 70,062 people and earn more than $7 billion in revenue per year.
Identifying an unfulfilled need in your community or the natural world and using your education, experience, and business talent for the good of humanity is one of the best ways to start a successful nonprofit organization.
It could take anywhere from two weeks to three months to get your nonprofit off the ground, granted that you have submitted the relevant paperwork and applied for the necessary licenses and permits.
While starting a nonprofit organization is not without its challenges, complying with federal and state requirements will make the process smoother.
Nonprofit organizations enjoy various financial privileges such as tax-exempt status, US postal service discounts, and public and private funding access.
The following step-by-step guide is designed to show you how to start a nonprofit in North Dakota.
1. Select a name for your organization
There are some essential first steps to get the process underway regardless of whether you’re forming a nonprofit or for-profit organization. One of the first steps is naming your nonprofit corporation. You’ll need to give careful consideration to the name of the organization as it establishes the brand.
Additionally, the name should be something that is easily searchable by potential sponsors, donors, and members. In the state of North Dakota, the legal name of the organization cannot come into conflict with any other nonprofit or business entity listed in the state.
Furthermore, ensure that the name is obtainable and does meet North Dakota State requirements. You are free to perform a name search on the North Dakota Secretary of State website to ensure that the name is indeed available.
Additional rules for naming a North Dakota-based nonprofit organization may be found on the North Dakota nonprofit naming statute.
The North Dakota nonprofit name does not need to contain the words corporation, company, Limited, Inc., or any abbreviation of one of these words.
Creating a website for the nonprofit organization is another possibility that should be considered, as giving your organization an online presence will open up more doors to further the cause.
2. Nominate a North Dakota registered agent
A nonprofit’s registered agent is an individual who serves as the nonprofit representative to the Secretary of State while you continue with the nonprofit organization‘s operations. In some states, registered agents are referred to as statutory, resident, or service of process agents.
The primary role of the registered agent is to receive correspondence such as tax notifications and compliance information on your nonprofit’s behalf. They are also tasked with accepting service of process documents. This includes legal summons and paperwork on behalf of your organization in the event that it is petitioned.
You may choose to nominate any individual or person as your nonprofit’s resident agent provided they meet the following criteria:
- The North Dakota resident agent must be a resident of the state
- The North Dakota resident agent must be at least 18 years or older
- The North Dakota resident agent must have a physical address, excluding PO Box addresses in the state of North Dakota
- They must maintain regular business hours at the registered physical address
- The North Dakota registered agent must accept and consent to the appointment
Any individual that meets the requirements mentioned above may serve as a nonprofit registered agent, including yourself.
Lastly, being a registered agent does come with essential responsibilities, and you need to ensure that you file the relevant documents and paperwork in time to avoid risking your corporation’s compliance status, or worse, having it revoked by the Secretary of State.
3. Recruit your board members
Your North Dakota nonprofit needs a board of directors as well as an incorporator.
An incorporator is a person responsible for signing and filing the Articles of Incorporation. When it comes to recruiting incorporators, you only need to nominate one, although you may have more.
When it comes to recruiting North Dakota directors, you need a minimum number of three individuals not related to each other.
Additionally, those individuals do not need to reside in the state, nor do they need to be stakeholders of the nonprofit organization. The default term of service is one year, and this goes up to a maximum of 10 years for fixed members.
Your North Dakota nonprofit also needs officers to serve the roles of secretary and president. The only requirement for officers is that they are 18 years of age or older.
4. Consent to bylaws and conflict of interest policy
There are two essential documents needed for the effective running of your nonprofit organization in North Dakota. One of the essential documents is referred to as the nonprofit’s bylaws.
Basically, they operate as the organization’s internal affairs guidebook. The bylaws are where you’ll put down procedures for organizing meetings, holding elections, membership structure and quorum requirements, etc. It’s basically a nonprofit’s handbook or manual and will guide you through the process of running an orderly nonprofit corporation.
Next, you also need to compile a Conflict of interest policy. This policy ensures that none of the members on the board are acting in their professional or personal interests but always in the best interest of the nonprofit and its cause.
These documents should be compiled, adopted, and ratified at the first board meeting where the directors and officers are pointed.
5. Select a North Dakota nonprofit startup corporation structure
The following organizational structures or types of nonprofits are available in the state of North Dakota:
- Social and Recreational Clubs: Under the Internal Revenue Code, these types of nonprofits are described as 501(c)7 organizations. They encompass country clubs, garden and variety clubs, hobby clubs, as well as amateur hunting, fishing, and sports clubs.
- Charitable Organizations or Charities: These nonprofits are regarded as 501(c)3 under the Internal Revenue Code and are exempt from taxes. These nonprofits are created 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, low-income housing organizations, daycare centers, mental health organizations, and environmental groups.
- Civic Needs and Social Welfare Organizations: These types of nonprofits are regarded as 501(c)4 under the Internal Revenue Code. They are formed to improve the overall good and welfare of people in the community.
Some examples of civic leagues and social welfare organizations include downtown improvement associations, healthcare, housing, civic groups, and social action organizations.
- Trade and Professional Associations: These types of nonprofits are considered 501(c)6 organizations under the Internal Revenue Code. They are usually business alliances and the likes. Some of the Trade and Professional Associations organizations are retail Chambers of commerce, merchants associations, real estate boards.
6. Prepare and file nonprofit Articles of Incorporation
Preparing and filing your North Dakota Articles of Incorporation is crucial in registering the nonprofit with the state. Therefore, the Articles of Incorporation also referred to as the Articles of Organization or Certificate of Incorporation will need to be filed with the North Dakota Secretary of State.
Some of the basic information that the articles must include are:
- Your North Dakota nonprofit’s name
- The name and address of the nonprofit registered agent
- The name and address of the incorporation
- The address of the nonprofit’s registered office
- A statement declaring that the nonprofit is incorporated under state law
Additionally, your Articles of Organization must include the language required by the Internal Revenue Service in order to attain federal income tax eligibility.
Therefore, unless your articles include the following information, you may not be eligible or able to obtain federal tax exemption in the state of North Dakota:
You need to state the reason for the existence of the nonprofit organization. Thinking of this as your organization’s mission statement will help you put things into perspective for the IRS
The dissolution will explain what your nonprofit’s assets are being used for and also what should happen to the assets upon your organization’s dissolution. Most nonprofits choose to leave their assets to existing charitable organizations.
You’ll find a template or form on the Secretary of State website to complete your articles. You’ll also find the relevant instructions to complete your articles on the same website.
7. File an initial report
There is no need to file an initial report for a nonprofit in the state of North Dakota.
8. Secure an EIN (Employer Identification Number)
An EIN is an Employer Identification Number. This is a unique tax identification number assigned by the IRS for nonprofits in the state of North Dakota.
This number is useful in many instances, including filing your nonprofit’s tax returns, opening up a business bank account for your nonprofit, putting in your tax exemption application as well as other government filings.
The application is 100% free of charge when you apply online via the IRS website. You will need to complete and file IRS Form SS-4 and then submit it online to immediately obtain your Employer Identification Number.
9. Apply for federal tax exemption
In order to be exempt from federal income tax, your North Dakota nonprofit needs to put in an application for federal tax exemption, under the Internal Revenue Code.
However, prior to putting in your application, ensure that your organization has met the following requirements:
- Recruited three directors not related to each other
- Adopted the Conflict of interest policy and bylaws
- Obtained an EIN from the IRS
- Filed the Articles of Organization with the required IRS provisions
Once you’ve completed the relevant form, go ahead and file Form 1023 or Form 1023-EZ with the Internal Revenue Service. The IRS will review your application and grant you a federal tax exemption upon receiving your application.
If this is the case, you should receive a determination letter from the IRS stating that your nonprofit is one of the existing organizations exempt from federal taxes.
Some of the benefits of obtaining federal tax exemption are:
- Access to tax-exempt financing from private foundations
- Exemption from federal unemployment tax
- Discounted US postal rates
- Possible exemption from sales, state income, and employment taxes
- Tax-deductible contributions
10. Apply for North Dakota state tax exemption
Receiving your IRS determination means that you do not need to file to obtain an exemption from state income tax or state sales tax in the state of North Dakota. Your nonprofit is automatically exempt from North Dakota corporate income tax as well.
11. Other applicable permits and licenses
North Dakota nonprofits are not required to apply for the statewide business license in order to legally operate their nonprofit in the state. However, depending on the county or town you’re located in, one or more licenses or permits may be required. Ensure that you check with your local licensing division to confirm whether or not you need to obtain additional business licenses.
Additional state registration and reporting requirements
Unless your nonprofit is an exempt organization, you need to register your organization with the North Dakota Secretary of State prior to conducting any fundraising activities or accepting charitable solicitations in the state.
12. Submit an annual report
A part of the process of having your North Dakota nonprofit up and running means you’ll need to submit your annual report to the Secretary of State. This needs to be done every year by the 1st of February.
Your annual report must confirm or update basic information regarding the corporation, such as your organization’s name, details of the registered agent, business address, and the names and addresses of everyone on the board of directors. Feel free to file your report online.
Costs of starting a new nonprofit in North Dakota
The following filing fees are applicable to all North Dakota nonprofit organizations:
- Articles of Organization: $40
- North Dakota charitable registration: $25
- Application for tax exemption or 501(c) status: $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.
Public charities play a crucial role in society. Not only do they bring together people who care about the nonprofit’s cause or purpose so that they can make a difference, but they help in various other ways. One of the primary ways that nonprofits positively impact the community is by providing direct help, raising awareness of a specific issue, and giving information where it is required.
501(c)(3) tax-exempt organizations are held to a high standard by the government due to their tax and financial privileges. Therefore, it is recommended that nonprofits comply with both federal and state laws in order to continue having access to public funding and not have their tax-exempt status revoked by the IRS. Keeping a copy of the IRS compliance guide on hand and deferring to it periodically will ensure that your nonprofit remains in good standing with the government.
The National Council of Nonprofits is there to advance the capacity and role of the nonprofit sector. It is basically a support structure for the nonprofit sector and gives voice to nonprofit organizations‘ regional and state associations. The National Council of Nonprofits is a trusted resource and a leading advocate for charitable nonprofits in America.
There are many ways to raise funds for your nonprofit organization. Many founders choose to create a donation page, send out fundraising letters, host fundraising events, and ask for sponsorships and donations. Launching a crowdfunding campaign is also another great idea to bring in sponsors and donors to further the purpose of your organization.
Fiscal sponsorship is when nonprofit organizations extend their tax-exempt and legal status to other charities, groups, or projects engaged in activities related to the fiscal sponsorship organization. So a fiscal sponsor is a tax-exempt corporation that consents to receive funds on your nonprofit’s behalf and also conducting other administrative functions on behalf of the nonprofit. So fiscal sponsors mean that they team up with your nonprofit organization to accomplish mutual charitable goals.