In this guide, we’ll show you how to form a nonprofit corporation in New York and file for tax-exempt status.
How to Form a Nonprofit Corporation in New York
Determine your nonprofit corporation type
The first step to forming your nonprofit corporation is to determine your nonprofit corporation type. As of July 2014, the New York Non-Profit Revitalization Act offers nonprofit corporations two distinctions: charitable or non-charitable.
Select initial board of directors
Once you’ve decided the purpose of your nonprofit corporation, the next step is to select your board of directors. All New York nonprofit corporations are required to have a minimum of three directors over the age of 18 on their board.
Choose a name
The name you choose for your corporation should communicate what you hope to achieve and what your corporation stands for. Your nonprofit corporation name should also be different from any other business that’s currently registered in New York. New York’s Corporation and Business Entity Database database provides a regularly updated list of companies and businesses that are registered in the state.
If the name you want is available, you can reserve it by filling out the Application for Reservation of Name form and mailing it to the New York State Department, who will reserve it for 60 days. If you want to avoid any mishaps and put your time into other things, use our name reservation service to give yourself peace of mind.
Once you’ve chosen a name, it’s the perfect time to think about your domain name. When you find one that aligns with your corporation’s name, use our domain registration service to secure it.
All nonprofit corporations in New York also are required to have one of the following designators at the end of their name: Incorporated, Corporation, or Limited. The abbreviations “Inc.,” “Corp.” or “Ltd.” may also be used.There are also certain words and phrases that aren’t allowed to be included in the name of your corporation. You’ll find a full list of restricted words on the New York Department of State website.
Choose a New York registered agent
Your nonprofit corporation (like all registered business entities) needs a registered agent. A registered agent is an individual or business that can receive official paperwork from the state’s business formation agency and notices of legal action, such as subpoenas.
In New York, the Secretary of State is listed as your official registered agent by default. However, by using a registered agent, you can have any legal documents forwarded to them instead of your place of business. It’s also possible to be your own registered agent, but that can be inconvenient if you’re served with a subpoena in front of a client, or need to be out of the office for significant periods of time. Before deciding what’s the best decision for your company learn more about the registered agent process in New York. We offer a registered agent service to help your corporation ensure compliance.
File a Certificate of Incorporation
The formal process of creating your nonprofit corporation involves filing a Certificate of Incorporation with the NYS Department of State. The payment can be made via check, money order, or credit card. You can file online on the New York Business Express site or download the form from the New York Department of State and mail it.
During this process, you’ll need to include accurate information regarding your corporation name such as:
- The name of your corporation
- Purpose of your corporation
- Deciding whether you’re a charitable or non-charitable corporation
- The county where your nonprofit office is located
- The names and address of the initial board of directors
Any information that’s important to future matters, such as asset distribution and rules in place regarding the dissolution of your nonprofit. Some corporations require additional approval from other governmental agencies, and this approval must be submitted along with your Certificate of Incorporation.
Create corporate bylaws
Bylaws outline the rules and procedures that your company will follow. These include how meetings are conducted, board members and officers are elected, and other corporate formalities that are in compliance with New York laws. The corporate bylaws are not filed with the Secretary of State.
Hold an organizational meeting with the board of directors
Once you’ve filed your paperwork and drafted bylaws, it’s time to host your first meeting with the board of directors. During this meeting, you’ll hold a vote to approve bylaws, appoint officers, and establish various administrative procedures such as the company’s accounting period and tax year.
Minutes should be kept after each meeting to cover points that were discussed and remind people of tasks and responsibilities that have been assigned. Many corporations set up a corporate records binder to store the minutes. These records can also be stored online in the cloud if it’s easier to keep track of.
Get a tax ID number
Obtaining a federal Employee Identification Number (EIN) is required for your corporation for tax filing and reporting. You’ll also need it to open up a corporate bank account or hire employees. You can get one for free from the IRS, or you can use our EIN Service to save yourself the stress of more paperwork.
Obtain licensing and register for state tax accounts
Depending on you what activities you intend to conduct, you may need to obtain special permits or licenses. The Small Business Administration provides a comprehensive list of resources to help you find the licenses and required in New York. However, there’s no central resource for this information, so it’s best to contact the local county clerk to understand what might be required.
New York offers tax exemptions for certain nonprofit corporations and religious entities. To be sure that you qualify for these tax exemptions, contact an accountant or lawyer who has a thorough understanding of nonprofit tax law.
If you’re unsure of what licenses and permits you will need for your nonprofit corporation, try our ZenBusiness business license report service. It’s designed to provide you with a simplified analysis of which permits and licenses are required for your business.
Apply for tax-exempt status
To gain tax-exempt status at the federal level, you’ll need to file Form 1023. Detailed information about your corporation such as finances, organizational structure, and business operations is required on this form. A shorter Form 1023-EZ is also available for smaller nonprofit organizations that have yearly earnings of less than $50,000.
To gain tax-exempt status and register as a charity in New York, there are additional forms that need to be filed. Form CT-247 is required to receive exemption from the New York corporation franchise tax. Form 25-119.2 is required to receive exemption from state and local taxes. The New York Department of Taxation and Finance is a great resource to find up-to-date information on tax rules and regulations.
Insurance can help you to protect your nonprofit corporation from liability. Workers’ compensation insurance is required for all part-time and full-time workers. To be safe, it’s a good idea to talk with a professional insurance agent to make sure you get all the necessary coverage for your nonprofit.
Ready to Kick Start Your Business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, 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.
New York Nonprofit Corporation FAQs
Can the founder of a New York nonprofit receive a salary?
A nonprofit founder working as an employee is allowed to earn a salary for their work as long as it’s not excessive. However, the maximum salary for certain nonprofit executives in New York is $199,000. Whether this cap applies depends on the size of your corporation and whether it receives state money to supply services.
What happens if a nonprofit makes money in New York?
Any money made by the nonprofit must be reinvested into the nonprofit.
What kinds of businesses can be a nonprofit in New York?
Charitable corporations can include museums, colleges, food banks, and low-income housing organizations. Non-charitable nonprofit organizations include business leagues, labor organizations, and recreational clubs.
Can New York nonprofits sell products?
Nonprofit corporations can sell products to help raise money for operational costs and activities.