Nonprofit Tax Help

David McRee, CPA


Incorporating Your Nonprofit

Before you can apply to the IRS for recognition of your organizations tax-exempt status, your organization must be incorporated. This is accomplished by preparing and filing your articles of incorporation (also referred to as "articles of organization" or "organizing documents") with the state in which you are incorporating.

There are three ways you can incorporate your organization:

  1. Do-it-yourself.
  2. Use an online incorporation service.
  3. Hire an attorney.


States generally have a "fill-in-the-blank" form that meets their requirements for incorporation. You can download your state's nonprofit corporation "one-size-fits-all" incorporation document from your state's "Division of Corporations" website. (Each state has a different name for the department that handles incorporations).

Be sure to download the "nonprofit" articles of incorporation, not the "for-profit" articles. You should read the instructions carefully. Florida, for instance, requires 3 directors to form a nonprofit. I also recommend that you read over the state statutes that govern formation, operation, and dissolution of a nonprofit corporation in your state.

Keep in mind that just because the articles you download may meet your state's minimum requirements to form a nonprofit corporation, it doesn't mean that the articles are of the best construction (from a legal perspective) to meet the particular needs of your corporation.

However, for most small nonprofits, your state's generic articles should be just fine.

You must understand that meeting state requirements and meeting the IRS requirements are two entirely different things. The IRS requires additional language in your Articles of Incorporation in order to qualify for tax-exempt status. See explanation further down the page.

In summary, to "do-it-yourself," download your state's nonprofit articles form, fill in the blanks, and add the necessary language required by the IRS (discussed below). I would advise retyping the whole thing in your word processor so it is neat and orderly and presented professionally. Read the State's instructions CAREFULLY.

Someone who is not an attorney should not create your organization's Articles of Incorporation (except for the founders of the organization). This means that your CPA should not create your Articles for you. This would be seen as the unauthorized practice of law by most State Bar Associations. Avoid that.


Note: This can be a gray area. Various individuals, such as bookkeepers, accountants, and CPA's advertise non-attorney incorporations. Generally, the Bar Association will view this as the unauthorized practice of law. However, if a person just helps you fill in the blanks on the state's template, this MAY be O.K. Also, it seems that the Bar in most states has not been particularly aggressive at going after non-attorney incorporation services.

To be clear, if you are the founder/director/officer of a nonprofit, you can, without an attorney, create your own Articles of Incorporation and bylaws, or you can use your State's generic Articles. It is perfectly legal to do so and many small organizations do it all the time.

Using an Online (Internet) Incorporation Service

Online Incorporation Services are less expensive (in many cases) than going to an attorney, and much easier than trying to do it yourself. However, not all online incorporation services know the special language that must be added to corporate articles to satisfy the IRS. If you choose to go this route, be sure to call or email the service and inquire if they satisfy IRS requirements (see below). If they don't seem to know what you are talking about, or if they say no, then take your business elsewhere, preferably to a local attorney. I have seen too many of these online services fail to properly include the required IRS language in the Articles they've prepared. This requires amended articles. Not a big deal, but it takes more time and costs more money.

Hiring an Attorney

The very best way to incorporate your organization is to hire a local attorney who is knowledgeable about incorporating nonprofit organizations. My suggestion is to get a referral from some other nonprofits. Find out who they use for an attorney. Talk to several attorneys and see who you are comfortable with. And shop for fees, if that is important to you. Fees vary widely. An attorney can also help you with your organizations bylaws. The bylaws are a document that spells out how the organizations is to be governed, how the directors are chosed, etc. Bylaws are not required by the IRS to get tax-exempt status, but I cannot imagine why you would form an organization without bylaws.

IRS Required Provisions in Your Articles of Incorporation

In order to qualify for tax-exempt status as a charitable organization [501(c)(3)], your organization's Articles of Incorporation must limit the organization's purposes to one or more of those described in that code section. Stating that the organization is permitted to carry on any and all activities legally permitted to be carried on in that state will not pass muster with the IRS.

Instead, the purpose clause must limit the activities to those described by the IRS as charitable. Example language:

"Do-Gooders, Inc is formed exclusively for charitable purposes within the meaning of section 501(c)(3) of the code."

Additionally, the assets of a charitable organization must be permanently dedicated to an exempt purpose. This means that if an organization dissolves, its assets must be distributed for an exempt purpose, or to the government for public purposes. Your articles of incorporation must contain a "dissolution" clause requiring proper distribution and dedication of assets upon dissolution.

For suggested language, refer to IRS Publication 557 Tax Exempt Status for Your Organization and review the sample articles of organization. IRS Publications.