Running your nonprofit as a business

This post describes the steps necessary to establish yourself as an unincorporated nonprofit.  The steps are almost identical to forming a sole proprietorship business (check your state to make sure they do not require any other special licenses or requirements for your nonprofit as a sole proprietorship).

The first step is visiting your county clerk.  They will have you check the assumed name (sometimes called fictitious name or DBA) and make sure that nobody else is doing business under your preferred name.  Once your name has been established as unique you file a form with them called “Assumed Name Certificate of Ownership for Unincorporated Business”.  This is a very simple form just stating your business name and your contact information (address, phone, etc.)  If you go from being unincorporated to incorporated, you will have to refile your DBA.  The average cost for filing a DBA is $14 but varies by state.

 After obtaining your DBA, you will need to file for an Employer Identification Number (EIN).  You may be able to use your Social Security number as your EIN but I have been advised that it is best to register as a separate legal entity with the IRS.  Do a google search for an example EIN application.  My personal accountant recommended that the DATE BUSINESS STARTED should be December.  Your start-up date is a personal choice and will truly depend upon your bookkeeper/accountant requirements..  I established my organization as a nonprofit from the beginning, but if you already have a business and plan to switch from a for-profit to nonprofit, you will have to refile your EIN to represent your new organization type.  This form can be filed online at www.Tax9er.com for $20.

 The next step is establishing your nonprofit with the state.  In Texas, the Secretary of State has a form called Statement Appointing Agent.  This is the only state requirement in Texas to establish an unincorporated nonprofit, you need to check with your SOS to insure there are no other requirements for your state:

http://www.keytlaw.com/Links/govrecords.htm  This statement appoints you to serve as the receiving agent for your organization.  If any liens or lawsuits (services of process) are issued against your organization, this gives the state a place to send them too.  You will have to list your EIN on this form as well as your physical address, PO Boxes will not be accepted.  This form must be mailed in or delivered personally to the Secretary of State office.  There is a $25 dollar filing fee.

 These steps DO NOT make you tax-exempt. 

Tax exemption is reserved for incorporated nonprofits and you will not be able to apply for state or federal tax-exemption until you incorporate.  Until you file for tax exemption, your business will be viewed as a sole proprietorship and you CANNOT offer tax-deductible donation privileges.  As an unincorporated nonprofit you will be required to file an income tax return on your business (Schedule C) rather than the 990 required of nonprofits.  You can view both of these forms at www.IRS.gov.  If you do not understand these forms, I strongly recommend that you print them out and discuss them in detail with your accountant.

 Once you have taken all these steps **again check with your local and state offices to ensure no extra permits or licenses are required for your particular organization**  You are set up to do business as an unincorporated nonprofit on the county, state and federal level.

Once you are doing business, it is highly recommended that you talk to your insurance agent about what kind of extra insurance you may need to cover your activities.  Here is a good link to start off with:

Insurance Guide for Nonprofit Organizations  

If your nonprofit requires heavy volunteer involvement, write down exactly what it is your organization and volunteers do and discuss this in depth with your agent, he or she will be better able to explain what needs your organization will have.

– all articles on this site are written by Tara Deck and provided by Secret-Angels, a nonprofit organization that assists nonprofits with incorporation, management and general business operations.  For more information please see the About Nonprofit Assistance page.