How to Start a Nonprofit in Alabama

Although the process of forming a nonprofit in Alabama is not difficult, there are some requirements that must be met in order to get your nonprofit approved. We’ll walk you through how to create an Alabama nonprofit corporation.

Reference links for Alabama nonprofits

These are the steps to take to create a non-profit 501(c),(3) corporation in Alabama.

Step 1: Choose the initial directors

To set up a corporation, you will need to select your first directors. Alabama requires that you choose at least three directors who are not related, but you may choose to have more. Directors are not required to reside in Alabama.

Step 2: Select a name

Your brand name and the values of your corporation will be represented by your chosen name. You should choose wisely. It is important to ensure that the name you choose is not already in use by an Alabama corporation. To check if the name that you are interested is in use, you can perform an Alabama business entity search.

You can request a name reservation request if you have a name you like but don’t want to use it for your official nonprofit organization. Reservations are valid for one year. To prove that your name has been properly saved, your Certificate of Formation must be filed.

Step 3: Select an Alabama registered agent

To receive legal and business notices for your corporation, it is important that you appoint a registered representative. The State of Alabama requires that a registered agent has a physical office that is open during business hours.

Be prepared to sort through lots of mail before you become your own registered agent. Also, don’t forget to place legal notices. Also, you will need to be available for your clients during normal business hours.

Step 4: Submit a Certificate Of Formation to the State of Alabama

Your entity is officially recognized by the Certificate of Formation. The Alabama Secretary of State website has a complete listing of all requirements. It can be filed by mail or online. This certificate does not contain the language that the IRS recommends to be exempt from federal taxes. Please refer to the section below on federal tax exemption.

Step 5: Make corporate bylaws

Before you file the Certificate of Formation you will need to create your bylaws. These bylaws will guide the corporation in how it handles legal issues and what the duties and titles of its board members are. These bylaws don’t have to be filed with the state. However, you should keep a copy with all your corporate documents.

Step 6: Call an organizational meeting of the board of directors

Before filing the Certificate of Formation, the board of directors must convene an organizational meeting. Each member of the board will vote on the bylaws, answer questions, and discuss important information about the corporation at this meeting. This meeting also allows for the appointment of other officers and tax planning. Also, a conflict of interest policy must be approved and written.

Keep a detailed record of the meeting and keep a copy.

Step 7: Create a corporate records system

You will be dealing with a lot of paperwork in your corporation. It is important to organize it and make it easy to find. You can use online software or a records binder to organize your data.

Step 8: Get your tax ID number (EIN)

Your corporation will require an employer identification number (EIN) before you can submit your federal or state tax exemption applications. The IRS can provide one free of charge. You will need this to be able to hire employees and open a bank account for your business. It also allows you to file your taxes every year.

Step 9: Apply for all Alabama permits and licenses

Alabama does not require corporations to hold a general business license in order to operate. However, some cities or counties may have special licensing requirements. To find out if licensing is required in your area, you will need to apply.

It is important that you obtain a business privilege license from the probate judge in each county in which you will do business in Alabama.

Step 10: Apply for tax-exempt status

After the corporation is formed, you can apply for tax-exempt status. This status is typically under 501(c).(3) Fill out Form 1023 to file with the IRS. There are two versions: one long and one short. You can read about them to ensure you choose the correct one for your organization. Once the form is processed, the IRS will notify your registered agent.

However, this does not mean that you will be exempted from all taxes. Nonprofits can still be subject to unemployment taxes if they have at least four employees who have worked for more than 20 weeks in the current calendar year. Other taxes, such as sales tax, may also apply.

Step 11: Register your nonprofit with the state as a charity

Register as a charity if you intend to solicit funds for your corporation. You can do this through the Alabama Attorney General Consumer Interest Division. To complete the form, you will need to fill out the information about your company.

Step 12: Get insurance for your nonprofit

Protect your company and all employees. General liability insurance is not a requirement but it’s a good idea to have, especially if your business provides services or sells items. You may also need workers’ compensation coverage. If you have more than five employees, this coverage is required.

You may require additional types of insurance depending on your industry and type of business. To determine the right insurance for your company, consult an insurance agent.

Step 13: Open a Bank Account

A bank account for business purposes is required by your corporation. Once your corporation is formed, you will be able open it once you have the documentation. Your EIN and Certificate Of Formation are required. To find out any additional items you might need, it is a good idea to call the bank in advance. This can be done by your treasurer or appointed at the first board meeting.

Alabama Nonprofit Corporation FAQs

  • Is it possible for a founder of a nonprofit to receive a salary? Yes, founders working as employees may be paid a reasonable salary by the corporation.
  • What does it cost to establish a nonprofit organization in Alabama? To start a nonprofit in Alabama, the current cost is $200. A convenience fee of 4% will be charged for submitting the Certificate of Formation. Check with the Alabama Secretary-of-State to verify current fees as they may change.
  • What happens when a nonprofit makes money? Nonprofits can make money if the money is used to further its mission or reinvested back in the company. It cannot pay out the money as a dividend.
  • Which businesses are eligible to be nonprofit? Alabama allows nonprofits to be approved for many different types of businesses. The state will approve businesses that focus on helping their community.
  • Can nonprofits sell products? Nonprofits can also sell products to raise funds for their cause or efforts.

Resources

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