Nonprofit organizations are created for various reasons. However, it is generally to improve people’s overall quality of life on a community, local, state, national or global level. Nonprofit organizations are important since they foster civic engagement and leadership, strengthen the communities’ fabric, and drive economic growth.
The state of Wisconsin has approximately 39,118 organizations in its nonprofit sector. Of these nonprofits, 450,060 people are employed, and Wisconsin nonprofits earn revenue of $58 billion each year.
Among the most successful nonprofits making their mark in the community are Wisconsin Nicaragua Partners of the Americas, Inc., Innovative Schools Network, and Reece’s Rainbow | Special Needs Adoption Support.
Starting a nonprofit corporation in the state of Wisconsin could take you anywhere between two weeks to three months. This is due to the fact that the necessary paperwork will need to be filed, and relevant laws will need to be complied with.
Once you’ve got your nonprofit up and running, it will enjoy various benefits not afforded to for-profit companies such as limited liability, discounts on US postal services, perpetual existence, and tax-deductible donations, among others.
The following step-by-step guide will show you how to start a nonprofit in the state of Wisconsin.
1. Select a name for your organization
Every Wisconsin nonprofit needs a name. The nonprofit’s name will establish its brand and image, requiring careful consideration.
Additionally, the name needs to comply with Wisconsin naming requirements and should also be found easily by potential members and donors.
When naming your Wisconsin nonprofit, keep the following naming guidelines in mind:
- The name you pick should not suggest that the nonstock Corporation was created for any other purpose other than what your Articles of Incorporation describe
- The name you choose should be distinguishable from other business entities and registered corporations in Wisconsin
- The name you choose should include an organizational designation like Inc, Ltd, Company, or Incorporated
You may want to check whether the name is available or already taken by doing a name search on the Secretary of State‘s website.
Wisconsin State Legislature’s Statute provides direction and complete rules on naming a nonprofit based in Wisconsin.
Additionally, in the event that you plan on creating a website for your nonprofit, you should definitely check if the business name is available as a web domain.
2. Nominate a Wisconsin registered agent
Every business entity in the state of Wisconsin will need to receive official mail and legal documentation.
Therefore, you need to appoint a designated individual to accept legal paperwork and service of process on the nonprofit’s behalf if a lawsuit is brought against your organization.
The registered agent can be anyone; however, they should meet the requirements below:
- The registered agent must be a resident of Wisconsin
- The registered agent must be at least 18 years of age
- The registered agent must maintain normal business hours
- The registered agent must consent to the appointment
3. Recruit your board members
Wisconsin nonprofits need to recruit incorporators and initial directors. Every nonprofit will need at least one incorporator to sign the Articles of Incorporation. However, some nonprofits choose to have more than one incorporator.
When it comes to the requirements for nominating directors, you need to nominate at least three. Directors are a part of the governing body of your organization but also stakeholders in the organization’s purpose and success.
Therefore, you should nominate individuals that have the necessary capabilities to help fulfill your nonprofit’s cause.
Directors serve a term of one year until a successor is nominated. They do not need to be residents of Wisconsin, nor do they need to be members of your Wisconsin nonprofit.
When it comes to recruiting officers, you need to select at least three individuals to fulfill the roles of president, secretary, and treasurer. The same individual may hold two or more offices.
4. Consent to bylaws and conflict of interest policy
Bylaws are important governing documents required by every nonprofit organization in the state of Wisconsin. The bylaws indicate a set of rules put in place to govern how the nonprofit is operated.
Additionally, a conflict of interest policy is also necessary and must be compiled at the same time as your bylaws. The conflict of interest policy is similar to the bylaws, however, and is a collection of rules set in place to ensure that all decisions made on behalf of the nonprofit are to further the cause and not individual members’ personal agendas.
Neither the bylaws nor conflict of interest policy need to be filed with the state. However, they must be kept on file and used for reference as and when needed. The governing documents should be established and ratified during your nonprofit’s first board meeting.
5. Select a Wisconsin nonprofit startup corporation structure
Deciding on the legal form for your organization is an essential part of this process. The state of Wisconsin has different types of nonprofits or organizational structures.
Usually, public charities take the legal form of a nonprofit public benefit corporation. However, other nonprofits are formed as associations or trusts.
It’s a good idea to seek legal advice to determine what legal form is best for your Wisconsin nonprofit. Thereafter, you’ll need the necessary forms available on the Wisconsin Secretary of State website in order to incorporate your business with the state.
Other types of corporations or types of nonprofits include mutual benefit and religious corporations. Mutual benefit corporations are created to benefit their members. This includes business leagues and social clubs.
Religious corporations are places of worship such as churches and synagogues.
6. Prepare and file nonprofit Articles of Incorporation
Wisconsin nonprofits need to prepare and file Articles of Incorporation. The articles officially marked the formation of the organization and document when and where the organization was formed. Ultimately, the information contained in your articles is essential to verify the organization’s existence.
In order to file the articles, you need to complete the Articles of Incorporation Form or template and file it on the Wisconsin Department of Financial Institutions (DFI) – Division of Corporate and Consumer Services – Corporations Bureau.
Aside from the names and addresses of your organization’s board of directors, your articles must explicitly contain two statements.
The first is a statement of purpose. In order to have 501(c)(3) tax-exempt eligibility, your nonprofit’s purpose must be explicitly limited to one or more of the following categories:
Charitable, Religious, Scientific, Educational, Literary, Fostering national/international amateur sports competition, Preventing cruelty to animals/children, testing for public safety
The articles should also state the purpose of your organization or contain your nonprofit organization‘s mission statement.
Secondly, you’ll need to include a dissolution of assets statement explaining how your corporation’s assets are currently being used and what will happen to the assets in the event of dissolution.
Your nonprofit should only ever be used for the purposes explicitly approved under section 501(c)(3) in order to be eligible for federal tax exemption.
Refer to the sample IRS document for further information and guidance on filing Articles of Incorporation.
7. File an initial report
Wisconsin nonprofits are not required to file an initial report with the state.
8. Secure an EIN (Employer Identification Number)
An EIN is an Employer Identification Number, also referred to as a Federal Tax Identification Number. This unique nine-digit code is used by the Internal Revenue Service to identify business entities in the state. Essentially, it’s more or less a social security number for your organization.
Once you’ve obtained an Employer Identification Number, you can use it to open up a corporate bank account for your nonprofit, hire employees for the organization, and submit it for federal and state tax purposes.
Obtaining an EIN is completely free of charge from the Internal Revenue Service. All you need to do is complete IRS Form SS-4 and submit it online.
The quickest way to get your EIN is to make the application online. However, you should note that the IRS website is operational during specific business hours, and in order to get your EIN immediately, you need to print it out prior to closing your session.
9. Apply for federal tax exemption
In order to obtain federal tax-exempt status, your Wisconsin nonprofit will need to file for federal tax exemption.
File Form 1023 and submit it to the Internal Revenue Service. Alternatively, small business organizations can file IRS Form 1023-EZ, a short and simple application form.
While filing to obtain federal income tax exemption is completely free of charge, your organization must fulfill the following requirements in order to have tax exemption eligibility:
- File the Certificate of Formation or Articles of Incorporation
- Adopt important governing documents and policies
- Obtain an Employer Identification Number
- Nominate at least three directors with no relation to each other
Once you’ve made your application with the Internal Revenue Service, they will review it and approve the application. In this case, you’ll receive an IRS determination letter stating that your organization is now one of the existing organizations or exempt organizations under the Internal Revenue Code.
In the event that your application is declined, you’ll receive a letter of explanation from the Internal Revenue Service detailing why the application was unsuccessful.
10. Apply for Wisconsin state tax exemption
Upon receiving your IRS determination letter, your Wisconsin nonprofit is automatically exempt from state income tax. Therefore, there is no need to file to obtain an exemption from state income tax.
However, you may still need to file to obtain sales and use tax exemption. File Form S-103 with the Wisconsin Department of Revenue.
11. Other applicable permits and licenses
A state business license may be required based on the type of activities your organization plans on carrying out and where it is located.
Therefore, you need to check with the clerk for the city where the nonprofit’s primary office is based. Consult the Wisconsin Department of Safety and Professional Services directory for additional state license information.
Additional state registration and reporting requirements
Unless exempt, all Wisconsin nonprofits, charitable organizations, and public charities that want to raise funds must register with the Wisconsin Department of Financial Institutions prior to conducting charitable solicitation or any type of fundraising activities.
12. Submit an annual report
All Wisconsin corporations require annual reports. Annual reports must be filed with the Department of Financial Institutions. The report may be filed online on the WDFI website. Alternatively, your organization may complete a fillable Nonstock Corporation & Limited Liability Company Annual Report Form either online or by mail.
All annual reports are due at the end of the calendar quarter of the anniversary month of the nonprofit’s formation. For example, if your nonprofit was created on the 15th of July, you must file the report by the 30th of September. The due dates are the 1st of March, the 10th of June, the 30th of September, and the 31st of December.
Costs of starting a new nonprofit in Wisconsin
The following filing fees are applicable to all Wisconsin nonprofits:
- Filing Articles of Incorporation: $35
- Application for federal tax exemption or 501(c): $275 or $600 IRS fee
- Wisconsin business tax registration: $20
- Wisconsin charitable registration: $15 ($0 if exempt)
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 National Council of Nonprofits provides the necessary information and guidance to nonprofit organizations to ensure that they are informed and empowered to fulfill their cause. Therefore, with the help of the National Council of Nonprofits, your organization will be able to positively impact the community, be it on a state, federal or global level.
The executive director of any organization is basically the highest-ranking executive. However, the title executive director is more commonly used in nonprofit corporations, while the term CEO is a well-known time for the head of a for-profit company.
Fiscal sponsorship is a nonprofit corporation providing fiduciary oversight as well as financial management and other administrative functions to assist another nonprofit organization. The fiscal sponsorship is useful if your nonprofit is currently still awaiting tax-exempt status or has been declined federal tax exemption. In this case, a fiscal sponsor will allow you to conduct fundraising activities, etc., under their organization.
Nonprofit charitable entities that single benefactors create are usually referred to as private foundations. Usually, they are formed by an individual, business, or through an endowment of funds. Public charities, on the other hand, are nonprofit organizations that derive their revenue from publicly collected funds.
Since nonprofit organizations enjoy various financial privileges, they are held to high standards by the government. Therefore, they have a duty to the public to ensure that they are not abusing their financial advantages. The IRS compliance guide contains all the necessary information to ensure that your nonprofit maintains its tax-exempt status.