If you’re the type of person who thinks about ways to improve the lives of others or your community, you’ve come to the right place. Forming a South Carolina nonprofit corporation could be exactly what you need to do. In this guide, we’ll walk you through the steps and tell you how to apply for tax-exempt status.
Steps to Form a South Carolina Nonprofit Corporation
- Select your initial directors
- Name the corporation
- Choose a South Carolina registered agent
- File the Articles of Incorporation with the state of South Carolina
- File an initial report
- Create corporate bylaws
- Hold an organizational meeting for the new board of directors
- Maintain your corporate records
- Get your tax ID numbers
- Apply for all your South Carolina licenses and permits
- File for state and federal tax exemptions
- Register as a charity with the state
- Acquire insurance
- Open a bank account
Step 1: Select your initial directors
You’ll need to choose at least three directors for your corporation. They don’t need to be residents of South Carolina, but they should be unrelated and will need to meet the requirements stated in the South Carolina Nonprofit Corporation Act. Your directors will be the governing body of your nonprofit corporation and will have the power to make decisions about it. The directors will also complete paperwork to finish the registration and formation of the nonprofit corporation.
Step 2: Name the corporation
When choosing a name for your nonprofit, it’s important to keep in mind that the name will reflect the brand and your mission. It’s important to choose something that applies to the type of corporation you have. You need to ensure that the name you choose isn’t similar to the name of any other business registered in South Carolina.
Search for available names on the South Carolina Secretary of State Division of Business Filings’ website. If the name you want is available you can reserve it with the Secretary of State for 120 days for a fee. Or, you can use the ZenBusiness name reservation service and rest easy knowing your name won’t be taken by someone else while you’re getting started on your nonprofit.
While you’re thinking about names, this is the perfect time to come up with a domain name that matches your nonprofit name. Once you have one, you can use ZenBusiness’s domain registration service so you can work on your online presence.
Step 3: Choose a South Carolina registered agent
A registered agent is someone who receives legal documents and papers from the Secretary of State on behalf of the nonprofit. The registered agent that you choose must live in South Carolina and have an office that operates during normal business hours. While you can be your own registered agent, there are a few drawbacks to this option.
You need to be at your office during regular business hours. This can be annoying if you want to go to lunch or need to attend a meeting somewhere. Another disadvantage is the awkwardness of being served with a legal process in front of a client. A professional registered agent will be set up to handle these tasks with ease. Learn more about our registered agent services and how we can help simplify this task for your corporation.
Step 4: File the Articles of Incorporation with the state of South Carolina
To create your corporation, you need to file the Articles of Incorporation with the state of South Carolina. Your articles need to include:
- Name of your corporation
- Address of the registered agent
- The address of the principal office
- A statement noting that it’s a public benefit, a mutual benefit, or a religious corporation
- A statement noting whether it will apply for or currently has tax exemption under 501(c)(3)
- Notes on how any assets would be distributed if the corporation dissolves
- Names and addresses of each director
- The name, address, and signature of an incorporator
You’ll need to file the Articles of Incorporation online or via mail with the South Carolina Secretary of State Division of Business Filings.
Step 5: File an initial report
South Carolina also requires nonprofit corporations to file an initial report after filing the Articles of Incorporation. There’s no additional fee to file this report. But if you don’t file it in a timely manner, you could incur a penalty.
Step 6: Create corporate bylaws
Bylaws determine how your nonprofit runs and operates. These include how meetings occur and when, how board members are elected, and other corporate issues. There must also be a conflict-of-interest statement. You can read about the full guidelines in section 33-31-206 of the South Carolina Nonprofit Corporation Act.
Step 7: Hold an organizational meeting for the new board of directors
The first meeting of your nonprofit is called an organizational meeting. This is where members will vote to approve the bylaws, elect directors, decide on how to manage the nonprofit, and how to maintain their corporate records. The board will also adopt the conflict-of-interest policy.
Step 8: Maintain your corporate records
Once your nonprofit is underway, you’ll start receiving a lot of important legal and business documents. You’ll need to keep these organized and in a safe place in case you need to reference them, usually a corporate binder. It’s also important to keep a record of meetings, referred to as minutes.
You can keep copies of all documents backed up in the cloud so you can access them from anywhere.
Step 9: Get your tax ID numbers
Every nonprofit corporation has an Employer Identification Number (EIN) for tax purposes. This is how the IRS identifies the corporation. An EIN allows you to hire employees, open business bank accounts for the corporation, and submit tax returns to the IRS.
You can find the forms you need to get your EIN on the IRS website and get one for free. You can file online, through the mail, over the phone, or via fax. You can also use the ZenBusiness EIN service to avoid paperwork and focus on your nonprofit.
Step 10: Apply for all your South Carolina licenses and permits
South Carolina doesn’t require a nonprofit corporation to apply for a retail license if it has been granted the sales tax exemption. However, depending on the nature of your corporation and its location, you may need to obtain city or county business licenses or permits.
Sorting through all of them to see which ones apply to your nonprofit and which don’t can be time-consuming. Instead, avoid the headache and use our business license report service that can help ensure you’ve applied for all the permits you need to operate legally.
Step 11: File for state and federal tax exemptions
Once you’re Articles of Incorporation have been approved, you can file for tax-exempt status, otherwise known as 501(c)(3). You can do this by filling out form 1023 on the IRS site. There’s a long version and a short one. Read about them and decide which one best fits your needs.
After you’ve been approved for tax-exempt status by the IRS, you’ll receive a determination letter. This will exempt you from South Carolina corporate income tax. Now, you can see what other exemptions apply to your nonprofit on the Department of Revenue’s website..
Step 12: Register as a charity with the state
If you’re planning to raise money for your nonprofit with fundraising activities, you should register as a charity with the state. This registration must be done with the South Carolina Secretary of State Division of Public Charities.
Step 13: Acquire insurance
Once your corporation is running, you’ll want to protect it by getting the right insurance. Each business has unique needs, but if you’re going to have employees you need unemployment insurance. If you have more than four employees, you’ll need to have workers’ compensation.
A qualified insurance agent can help you choose the right policies to protect your corporation.
Step 14: Open a bank account
Your South Carolina nonprofit corporation will need to have its own bank account. You’ll need to bring your EIN and your Articles of Incorporation. It’s a good idea to call ahead to see what other items they might want you to have on hand when you open the account.
Ready to kickstart 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 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.
South Carolina Nonprofit Corporation FAQ
- Can the founder of a South Carolina nonprofit receive a salary?
Yes, the founder can be paid a reasonable salary if they’re working as an employee.
- What happens if a nonprofit makes money?
Any money made needs to be reinvested back into the nonprofit.
- What kinds of businesses can be nonprofit?
Nonprofits can fall into many categories such as religious, educational, human services, animal welfare, and scientific. If you’re unsure if your nonprofit meets the guidelines, check with the Secretary of State.
- Can nonprofits sell products?
Yes, the IRS allows nonprofits to sell products to raise money.
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