The state of Oregon has approximately 22,000 nonprofit organizations. Approximately 15,188 of these public charities have obtained federal tax-exempt status.
It could take anywhere between two weeks to three months to start a nonprofit in the state of Oregon, that’s if you have all of your paperwork in order and have complied with the relevant laws.
However, once you’ve formed a nonprofit organization and received your federal tax-exempt status, you’ll enjoy various benefits, including limited liability and access to tax-deductible donations and sponsorships from public and private foundations.
The following step-by-step guide will give you an idea of what it takes to start a nonprofit in the state of Oregon.
1. Select a name for your organization
Irrespective of the purpose or mission of the nonprofit organization, just like for-profit organizations, it will need an established name. This makes it easy for potential members and stakeholders to find your organization when they need to.
Additionally, your Oregon nonprofit must comply with state naming requirements. To help you pick an appropriate name, follow the naming guidelines below:
- The name you choose cannot imply that the nonprofit was created for any other reason other than what is stated in your Articles of Incorporation
- The Oregon nonprofit name should not include the words cooperative or limited partnership
Additionally, refer to the Oregon statutes for the complete naming guidelines when it comes to selecting a name for your Oregon-based organization.
A name search may also prove helpful to ensure that the name is already taken by another company in the state of Oregon.
2. Nominate an Oregon registered agent
A necessary part of your nonprofit formation is recruiting a registered agent. The registered agent is the individual tasked with accepting legal documentation on your organization’s behalf. Additionally, they’ll need to accept official mail on behalf of the nonprofit in the event that a lawsuit is brought against the organization for whatever reason.
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Therefore, this individual:
- Must be based in the state of Oregon
- Must have an office address in the state
- Remain open during regular business hours
- Be at least 18 years of age
- Consent to the appointment
While you can choose yourself as your organization’s own registered agent, one of the reasons that this is not recommended. This is because you’ll need to be available during office hours at the address mentioned, at all times. The drawback is that you cannot leave for outside meetings.
Additionally, the address will be listed in the public record, and this means there’s a possibility of receiving a lot of junk mail.
Lots of organizations choose to appoint a member of the Board of Directors as the organization’s registered agent.
3. Recruit your board members
An essential part of the nonprofit formation process is recruiting incorporators and directors. It’s important because it is required for filing with the state of Oregon as well as with the federal government.
To start with, you’ll need to recruit incorporators. The incorporators are responsible for signing and delivering your nonprofit’s Articles of Incorporation. You may appoint any individual as a nonprofit incorporator as this is a short-term role. You may also nominate yourself as the nonprofit’s incorporator.
Next, you must nominate directors for the nonprofit. The directors make up the governing body of the organization, and if your nonprofit is a public benefit corporation, then the state necessitates that you have at least three directors.
However, if you are a religious or mutual benefit organization, then you only need to recruit one director for the board.
The directors do not need to be citizens of Oregon, nor do they need to be members or stakeholders of the nonprofit organization. The term limit for directors is five years.
When you recruit your Board of Directors, complying with IRS requirements is essential. These rules always come into play when you apply for tax exemption. Therefore, your forms must match. When recruiting directors, also bear in mind that they need to be over the age of 18.
Additionally, when nominating directors, a word of advice is that you should opt for a diverse group of people who bring in different types of experiences and skills. This is because the directors will serve a key role within your organization.
Directors should help you raise funds, address genuine nonprofit needs throughout the mission, and connect with your community.
4. Consent to bylaws and conflict of interest policy
The next essential part of the nonprofit formation process and one that is required prior to filing the Articles of Incorporation is preparing and establishing initial governing documents and policies.
The first document that’s required is your Bylaws.
The Bylaws are basically the rules and mechanics of how your nonprofit is going to be operated. The Bylaws need to include your organization’s mission, board structure, and requirements for holding board meetings, among other things.
Ultimately, the most important part of forming your Bylaws is that it should be transparent to the community.
A Conflict of interest policy is also required as part of your nonprofit’s governing documents. It’s a way to monitor the behavior of the board of directors and key stakeholders in a nonprofit.
This policy is put in place to make sure that any decision made on behalf of the nonprofit organization is always to benefit the organization and not the individual or personal agendas of board members.
These Bylaws should be drafted when the board holds its first organizational meeting. The Bylaws don’t need to be submitted to the state of Oregon; however, it is your nonprofit’s internal management handbook and therefore should be kept safe for reference as and when needed.
5. Select an Oregon nonprofit startup corporation structure
The state of Oregon has different types of organizational structures. So this part of the process depends on you deciding on the legal form for your organization.
Typically, charities take the legal form of a nonprofit public benefit corporation. However, other nonprofits are established as trusts or associations.
It’s advisable that you consult legal advice to determine what legal form is best for your organization. Thereafter, you’ll need the necessary forms available on the Oregon Secretary of State Corporation Division website in order to incorporate your organization.
Other types of organizations or types of nonprofits include mutual benefit and religious corporations. Mutual benefit corporations are formed typically to benefit their members. This includes the business leagues and social clubs.
Religious corporations are typically churches and other places of worship.
6. Prepare and file nonprofit Articles of Incorporation
In order to incorporate a nonprofit organization in the state of Oregon, you’ll need to prepare and file Articles of Incorporation. The Articles of Incorporation must include important details in addition to being signed and delivered by your nominated incorporators.
Some of the important details you must include in the articles are:
- The nonprofit’s name and mailing address
- Your registered agent’s name as well as address
- Whether the corporation is a public benefit, mutual benefit, or religious organization
- Whether the nonprofit intends to have members of stakeholders
- A dissolution clause stating what would happen to the assets of the nonprofit in the event of dissolution
- Your incorporator’s name as well as address
- The signatures of every person involved in the nonprofit formation process
When filing online, use the Oregon business Registry to submit the form. The benefit of filing online is that the turnaround time is instant.
An important note is that you must review how to apply for 501(c)(3) status prior to submitting since the Internal Revenue Service has its own provisions, and the language will need to match on both submissions.
7. File an initial report
An initial report is not a requirement with the state of Oregon.
8. Secure an EIN (Employer Identification Number)
Prior to submitting an application for federal tax exemption, you’ll need to have eligibility for 501c tax exemption. And you cannot be eligible unless you obtain an Employer Identification Number.
This is basically a nine-digit number that the Internal Revenue Service assigns to organizations within the state. It’s considered a Social Security number for business entities.
The EIN is useful in many instances, such as:
- Opening a business bank account for your organization
- Pursuing tax exemption
- Allowing donors to accept tax benefits
Applying for your EIN is completely free of charge through the IRS website.
However, please be aware that you should complete your session prior to logging out in order to obtain your EIN immediately.
9. Apply for federal tax exemption
After completing the steps mentioned above, you’re finally on your way to forming a successful nonprofit organization. This is because you’re now ready to file for 501(c)(3) federal income tax exemption, under the Internal Revenue Code.
All nonprofit organizations in Oregon will need to apply with the IRS by filling out Form 1023. This form should be filed online. In order to be allowed to fill in and submit Form 1023, you must not meet the requirements for Form 1023-EZ.
Form 1023-EZ is a significantly shorter and simpler application form; however, it’s intended for small business organizations that expect to earn under $50,000 in the next three years. However, if you plan on raising more than $50,000 over the next three-year period, then you should file Form 1023 if you still want to file as a 501(c)(3) organization.
An important note is that you’ll need to include your nonprofit Articles of Incorporation with these forms before submitting them to the IRS. This is one of the more tedious steps in the process; however, it requires careful attention, so take your time.
Once the application is approved, you likely receive a determination letter from the Internal Revenue Service recognizing your nonprofit as one of the existing organizations or charitable organizations with tax-exempt status.
Alternatively, if the application is not approved for whatever reason, you’ll receive a letter of explanation from the Internal Revenue Service.
10. Apply for Oregon state tax exemption
Once you’ve received your IRS letter of determination, you are inadvertently exempt from state income tax in Oregon or an exempt organization. Additionally, Oregon does not currently have a state-level sales tax. Therefore, there’s no need to obtain an exemption from state sales taxes as well.
11. Other applicable permits and licenses
A general business license is not a requirement in order to operate in the state. However, based on the products and services that your nonprofit plans on providing as well as the county or town you’re located in, you may require more licenses or permits. The Oregon Business Xpress License Directory will help ascertain the conditions for your organization.
Additional state registration and reporting requirements
Based on your organization’s size as well as the activities you plan on conducting, you might be required to register or enrol with the state of Oregon prior to conducting fundraising or participating in the charitable solicitation. For further forms and information regarding fundraising and registration requirements in the state, refer to the office of the Attorney General.
12. Submit an annual report
All Oregon nonprofit corporations must submit an annual report each year. The report must be submitted to the Oregon Secretary of State Corporate Division Department.
Costs of starting a new nonprofit in Oregon
The following filing fees are applicable to all Oregon nonprofits:
- Articles of Incorporation: $50
- Application for tax exemption or 501(c): $275 or $600 IRS fee
- Name reservation fee: $50 (optional)
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 amount of time it takes to start a nonprofit in the state of Oregon will vary from one nonprofit to the next. For example, filing Articles of Incorporation online means you’ll hear back instantly; however, if you fax the form, it will take one to two days or 7 to 10 days if you use the mail option. Applying for 501(c) tax-exempt status takes approximately one month and could take up to three months until you receive your IRS Determination letter.
You’ll need to submit Articles of Dissolution in order to dissolve the nonprofit organization. The Articles of Dissolution must be submitted to the office of the Secretary of State. Instructions for dissolving a nonprofit may be found on the Oregon Secretary of State website and is worth reviewing.
There are various benefits to starting a nonprofit in Oregon. Incorporating the nonprofit protects your organization’s assets from creditor claims and lawsuits, and officers, trustees, and volunteers of the organization are likewise protected. Additionally, Oregon nonprofits are exempt from federal tax on any income that is directly related to their exempt purposes. Oregon also does not collect sales taxes, and nonprofits who have exempt status are eligible to receive public and private funding.
You will need to complete the Articles of Incorporation Form, complete the incorporator’s statement, compile bylaws, and complete Form 1023 for recognition of exemption. Additionally, the IS Form SS-4 is required to obtain an EIN for your nonprofit organization.
There are specific guidelines to retaining a nonprofit’s exempt status. Some of the most pertinent steps include keeping a detailed record of all sources of income and filing annual reports. Also, ensure that you maintain detailed records of public meetings and ensure that your nonprofit assets are distributed to another tax-exempt organization in the event of dissolution. Lastly, keep unrelated activities separate from your organization and pay taxes on them. The IRS compliance guide contains a complete list of guidelines to retain your nonprofit status.