Starting a nonprofit is an exciting and rewarding opportunity, but it can also be challenging. Here is some important information and services to help guide you through the process:
What is a Nonprofit?
In Pennsylvania, nonprofit corporations are those corporations whose members or shareholders may not receive any of the pecuniary [monetary] profits of the corporation. A nonprofit corporation may be formed for any lawful purpose or purposes, including, but not limited to: athletic; any lawful business purpose to be conducted on a not-for-profit basis; beneficial; benevolent; cemetery; charitable; civic; control of fire; cultural; educational; encouragement of agriculture or horticulture; fraternal; health; literary; missionary; musical; mutual improvement; patriotic; political; prevention of cruelty to persons or animals; professional, commercial, industrial, trade, service or business associations; promotion of the arts; protection of natural resources; religious; research; scientific and social. A nonprofit corporation must be able to fulfill its purpose without financial benefit to its members, director or officers, except as salaries and expenses. (https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Pennsylvania-Nonprofit-Corporations-.aspx)
Types of Nonprofits
A nonprofit organization commonly performs some type of public or community benefit, without the purpose of making a profit. There are various categories of nonprofits recognized by the Internal Revenue Service (IRS):
- Charitable or religious organizations
- Social welfare organizations
- Labor and agricultural organizations
- Business leagues
- Veterans organizations
Each category has different tax benefits and requirements. While the majority of nonprofits are classified under 501(c)(3) of the IRS Code as charitable organizations, you should review the categories to determine the right choice for your nonprofit organization.
Incorporating a Nonprofit
This process is very similar to creating a regular corporation except that you have to take the extra steps of applying for tax-exempt status with the IRS and their state tax division. These are the steps to take to incorporate your nonprofit:
- Choose a business name – Make sure to check the state-by-state information on the various laws that apply to naming a nonprofit in your state.
- Appoint a Board of Directors – Draft your bylaws with guidance from your Board of Directors. These are the operating rules for your nonprofit.
- Decide on a legal structure – Choose whether your organization will be a trust, corporation, or association.
- File your incorporation paperwork – You must next file formal paperwork, or articles of incorporation, and pay a small filing fee to your state. Look up your state office through the National Association of State Charity Officials (NASCO).
- Apply for tax-exempt status – A nonprofit organization may be eligible for exemption from federal income tax. The IRS provides guidance and instructions on applying for tax-exempt status. Learn more about federal tax exemption requirements in IRS Publication 557 – Tax-Exempt Status for Your Organization (PDF, Download Adobe Reader) or by calling the IRS Tax Exempt and Government Entities Hotline at 1-877-829-5500.
- Obtain necessary licenses and permits – Does your nonprofit have all the licenses and permits needed to comply with federal, state, and local rules?
Accessing Grants, Loans, and Other Assistance
While individual donors make up the largest contributors to nonprofit organizations, federal, state and local governments offer grants, loans, and programs to support funding. Grants.gov helps you find and apply for federal government grants for your nonprofit.
As an independent, mutual bank, Penn Community Bank is committed to serving as a catalyst for growth in the neighborhoods we serve. After all, the fact that “Community” is our middle name is no accident. In addition to hundreds of our team members volunteering with a wide range of community, we contribute 5% of our net income annually to nonprofit organizations.
Learn more about our commitment to community growth HERE
Learn about our financial products built specifically for non-profits HERE