Maybe you aren’t sure where to start. Maybe you think it’s too much work. If so, look no further. Read on to find out how to form a Vermont Nonprofit corporation and how to apply for tax-exempt status.
Steps to Form a Vermont Nonprofit Corporation
- Select initial directors
- Choose a name
- Choose a Vermont registered agent
- File Articles of Incorporation with Vermont
- Create your Vermont nonprofit corporation's bylaws
- Hold an initial organizational meeting for the board of directors
- Set up a corporate records binder
- Get tax ID numbers
- Apply for all Vermont licenses and permits
- Apply for tax-exempt status
- Register as a charity with the state
- Open a bank account
In Vermont, becoming a nonprofit corporation requires registration under Vermont state law Title 11B of the Vermont Statutes Annotated.
Step 1: Select initial directors
First, you need to select your initial directors. In Vermont, you must have at least three board members who are not related. There are no residency requirements.
Step 2: Choose a name
Select a memorable name that suits your nonprofit’s focus and meets the following criteria:
- Isn’t the same or similar to a previously registered name in Vermont.
- Includes the word “corporation,” “incorporated,” “company,” or “limited,” or their abbreviations of “corp.,” “inc.,” “co.,” or “ltd.”
- Doesn’t include the word “cooperative” or its abbreviation.
- Doesn’t imply a business purpose other than what your Articles of Incorporation describe, including anything unlawful.
Check to see if your name is available by searching the Vermont Secretary of State’s Corporations Division website. If it is, but you’re not ready to file, you can reserve your name for 120 days.
Now’s the time to find a domain name for your website that aligns with your business name. Once you find one use our domain registration service to secure it.
Step 4: Choose a Vermont registered agent
A registered agent is an individual or business responsible for accepting legal notices and any documentation from the business formation agency in the state on behalf of your nonprofit corporation. This agent must be physically present at a registered office in Vermont during regular business hours.
Although you’re allowed to appoint yourself as your registered agent, some advantages of assigning this job to an outside party include:
- You won’t receive lawsuit notices at your place of business.
- You won’t need to be physically available during all business hours.
- If you’re a web-based nonprofit, you won’t need a physical office.
Or, you can use ZenBusiness’s Vermont-based registered agent partners to take care of this requirement for you.
Step 5: File Articles of Incorporation with Vermont
File Articles of Incorporation to take the first step in legally establishing your nonprofit corporation in Vermont. Visit the Vermont Secretary of State’s online business filing agency to file online, or you can also file by mail or in person.
Articles of Incorporation include the following information:
- Your nonprofit’s registered name and purpose
- Contact details for each incorporator
- The corporation’s principal office address
- The registered agent’s name and office address
- Your nonprofit’s dissolution plan
Step 6: Create your Vermont nonprofit corporation’s bylaws
Bylaws make up an important legal document and serve as your nonprofit’s operating manual. They detail your day-to-day and big-picture managerial and operating principles. This document contains your nonprofits’ rules and procedures for:
- Electing officers and directors
- Holding meetings
- Taking care of other corporate responsibilities required by state law
Some questions your bylaws should answer are:
- Will your nonprofit have voting members?
- Will those members have varying rights and responsibilities?
- How long is a director’s tenure?
Vermont doesn’t require that you file a copy of your corporate bylaws with your Articles of Incorporation. Instead, you must keep a copy at the nonprofit’s principal office.
To apply for tax-exempt status, your nonprofit needs a conflict of interest policy, adopted at your first board of directors meeting. This policy ensures the directors’ decisions benefit the nonprofit and not individual members.
Step 7: Hold an initial organizational meeting for the board of directors
At your nonprofit’s first organizational meeting of the board, you’ll need to review and ratify the bylaws and achieve the following:
- Set both a fiscal and tax year-end
- Elect directors and appoint officers
- Approve things like the opening of a corporate bank account
- Keep accurate meeting minutes
Step 8: Set up a corporate records binder
A corporate records binder or an online storage platform like the cloud holds the aforementioned documents critical to your nonprofit corporation. This must be maintained with detailed records for compliance and auditing purposes.
Step 9: Get tax ID numbers
All nonprofit corporations in Vermont need an Employer Identification Number (EIN) — even if there are no employees. This nine-digit personalized number allows the IRS to identify your business on tax returns and other important financial paperwork. It allows you to open a bank account and protect your personal assets. They are issued by the IRS.
You can also get one using ZenBusiness’s EIN service which will free up your time and allow you to focus on your nonprofit.
After that, you are also legally required to register for a Vermont business tax account.
Step 10: Apply for all Vermont licenses and permits
Your responsibility is to secure all business licenses and permits your nonprofit may need to operate legally in Vermont. Licensing can take place on the federal, state, or local level.
Since the requirements vary based on your business activities, location, and industry, understanding them can be overwhelming. Plus, there’s no centralized resource providing this information.
ZenBusiness offers a business license report service that provides a list of licenses and permits you might need for your company’s operation.
Step 11: Apply for tax-exempt status
Your Vermont nonprofit corporation may be eligible to receive federal tax-exempt status from the IRS. To apply, complete and file IRS Form 1023. There’s a long form and a short one. Fill out the one that best meets the needs of your nonprofit. There’s specific language you need to use, so make sure you read about that on the IRS website.
When your application has been approved, you’ll be sent a letter of determination confirming your tax-exempt status. For filing requirements and information on exemptions from sales, property, income, and other state taxes, check with Vermont’s Department of Taxes.
Step 12: Register as a charity with the state
Vermont doesn’t require charitable licensure for Vermont nonprofits. However, all paid fundraisers and paid solicitors who directly or indirectly solicit donations must register annually and pay a registration fee. The Attorney General’s website has more information about registration and fundraising requirements for nonprofits in Vermont.
Foreign (out-of-state) nonprofits wishing to solicit membership in Vermont must obtain a Certificate of Authority from the Secretary of State’s Office. For more information about registering as a foreign nonprofit, visit the Foreign Business Registration website.
The types of insurance your nonprofit needs depend on your business activities and many other factors. If you have employees, unemployment insurance is necessary as is worker’s compensation. Use a qualified insurance agent to help you determine your insurance needs.
Step 13: Open a bank account
A business bank account protects your personal assets by separating them from your company assets and makes accounting and tax filing easier. To open this account, you need:
- Your EIN
- A copy of the Articles of Incorporation
- A copy of the bylaws
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 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.
Vermont Nonprofit Corporation FAQ
- Can the founder of a Vermont nonprofit receive a salary?
If the founder of a nonprofit is working as an employee, they can receive a fair salary for their work.
- What happens if a nonprofit makes money in Vermont?
Profits made from a tax-exempt nonprofit’s activities associated with the nonprofit’s purpose are not taxable as income and must be reinvested back into the nonprofit.
- What kinds of Vermont businesses can be a nonprofit?
To qualify for nonprofit status, you must form your corporation to benefit a specific group of individuals, the public, or its membership.
- Can nonprofits sell products in Vermont?
Nonprofits can sell goods or services to raise money.