In 2020, there were 13,300 registered charities in Colorado, all dedicated to doing good in the community. Colorado nonprofit corporations made more than $28 million dollars in revenue to put toward good works. If you have a burning passion to make the world a better place, a Colorado nonprofit corporation is a good place to start. However, the requirements for approval as a nonprofit tend to be complex. This guide shows you how to form a nonprofit corporation in Colorado, from choosing initial directors to getting tax-exempt approval from the IRS.
In Colorado, your nonprofit organization only needs one director. However, the IRS tends to look more favorably on nonprofits that have three or more directors. Keep this in mind if you plan to apply for 501(c)(3) status.
Colorado has very few requirements for nonprofit names; however, it can’t be the same as any other Colorado corporation. A quick search of the Secretary of State Business Database can show you if your preferred name is available.
You should also consider your online presence. ZenBusiness’s domain name service can secure a domain name for you and help find one that aligns with your nonprofit name.
You can reserve a name while you get your filing prepared.
A registered agent is an individual or entity that receives service of process on behalf of your nonprofit. Its primary function is to receive legal and state documents and ensure your organization receives them.
In Colorado, all registered agents must consent to the appointment and have a physical street address in the state. Individuals acting as registered agents must be aged over 18 and live in Colorado. Entities must have a usual place of business in the state and have authority to transact business in Colorado.
Your nonprofit organization can act as its own registered agent, or a director can be listed as the registered agent. There are disadvantages to doing this. The name and address of a registered agent is public record, which can infringe on a director’s privacy. The agent must also be available during normal business hours, so you’re tied to one place.
Using an outside entity as a registered agent helps ensure legal papers are served away from your place of business. We have a registered agent service in Colorado that can ensure documents are handled properly and delivered promptly.
Articles of Incorporation must be filed electronically in Colorado, and all the information needed by the state is noted on the form.
The Colorado Periodic Report keeps you in good standing with the secretary of state and can be filed online. After you file the first one, you must file each year within three months of the anniversary of your initial filing. If you sign up for email reminders, the secretary of state will let you know when the report is due.
Nonprofit corporations must have bylaws. They don’t need to be filed with the state, but you must have them. They contain the rules and procedures of your nonprofit organization. They must comply with Colorado law, but there’s no filing requirement.
The first meeting of your board of directors needs to appoint officers and set an accounting period and tax year. Initial transactions and the bylaws also require approval from the board. Make sure you keep the minutes of the meeting.
Important records must be securely kept, including financial records and minutes. Many Colorado nonprofit corporations keep this information in a records binder, but you can also store it electronically on the cloud or other digital platforms.
The federal Employer Identification Number (EIN) serves as your organization’s IRS identification. It’s used to open bank accounts and submit tax returns. Our EIN service can quickly secure an EIN for your nonprofit organization.
You also need to register for a Colorado Sales Tax Withholding Account. If your charity employs staff and withholds income, you also need an unemployment insurance tax account number and rate. There are different application options, including an online form.
Your Colorado nonprofit corporation may need licenses and permits. There’s no central listing, as they can differ based on the type of organization. There are also federal, state, and local licenses. It’s your responsibility to obtain all the licenses and permits you need. We can provide you with a business license report to help ensure you’re compliant.
Larger charities use Form 1023 to apply for 501(c)(3) status with the IRS. Charities that expect an income of less than $50,000 can use the streamlined Form 1023-EZ. When you’re approved for tax-exempt status with the IRS, your organization is automatically exempt from Colorado corporate tax. You should file an application if you want to be exempt from state sales taxes. Local authorities can give you information about exemptions from local sales and property taxes.
The IRS has additional requirements for nonprofits applying for 501(c)(3) status. You need a purpose clause and a statement that you won’t engage in activities unrelated to your tax-exempt status. You must also state that if the corporation dissolves, assets will go to another charity or the government.
There isn’t space on the form for the statement, but it can be added as an attachment under the additional information section.
Most Colorado nonprofit corporations need to register as a charity before soliciting contributions. You can register on the Colorado Secretary of State website.
Every organization has different insurance needs based on its activities and assets. All nonprofits must have workers’ comp coverage if they have employees. Colorado nonprofit corporations should generally have unemployment insurance; otherwise, they become a direct reimburser to the state. A qualified insurance agent can help you determine your insurance needs.
Your organization needs a separate bank account to ensure its income is kept separate from the personal income of directors. You can open a business account with your EIN.
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service or are looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.
Colorado Business Resources
A nonprofit founder cannot obtain profits from fundraising and sales, but they can receive a salary. However, the IRS states that wages for directors and employees of nonprofits should “not be excessive” and conducts audits to ensure salaries are reasonable. Breaking this rule may lead to losing your nonprofit status.
Fees include incorporation fees of $50, a charitable license fee of $8, and a $10 fee for charitable solicitation. In addition, the IRS filing fees can be as high as $600.
A Colorado nonprofit organization is allowed to make money, but it needs to be reinvested into the charity or its works. Profits can be set aside to cover expenses or fund activities in the future.
Yes. Nonprofits can sell donated goods or sell goods and services to make money to fund their purpose. Many hospitals are nonprofits that charge for medical services and charities sell branded products both to fund programs and raise awareness.
Nonprofit corporations that receive tax-exempt status from the IRS must be formed for religious, charitable, scientific, literary, or educational purposes. These are broad categorizations and nonprofit corporations include food banks, museums, theater groups, and day care centers.
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