These are the steps to create a Colorado nonprofit 501(c),(3) corporation.
There were 13300 registered charities in Colorado in 2020. All of them are dedicated to helping the community.
Colorado nonprofit corporations generated more than $28 millions in revenue that was used to fund good works. A Colorado nonprofit corporation is a great place to begin if you are passionate about making the world a better place.
The requirements to become a nonprofit are often complicated. This guide will show you how to create a Colorado nonprofit corporation, starting with choosing the initial directors and ending with tax-exempt approval by IRS.
Reference links for Colorado Nonprofits
- Small Business Administration – License and Permits
- Colorado – Secretary of State
- Colorado – Department of Labor & Employment
- IRS – Information for Charities & Nonprofits
- IRS – Required Provisions for Organizing Documents
- IRS – 990 Series for Tax-Exempt Organizations
- IRS – Applying for Tax-Exempt Status
- IRS – 501(c)(3) Compliance Guide
Step 1: Choose the initial directors
Your Colorado nonprofit organization will only need one director. The IRS will consider nonprofits with three or more directors more favorable. This is important to remember if you are applying for 501(c),(3) status.
Step 2: Select a name for the Colorado Nonprofit
Colorado does not have any requirements for nonprofit names. However, they cannot be the same as any other Colorado company. You can check the Secretary of State Business Database to see if your preferred name has been taken.
Your online presence is also important.
Step 3: Choose a Colorado registered agent
A registered agent is an individual, or entity, that serves process for your nonprofit. Its primary function it to receive legal and state documents for your organization and make sure they are received.
All registered agents in Colorado must consent to being appointed and have a street address. Registered agents must be over 18 years old and reside in Colorado. The entity must have a place of business in Colorado and be authorized to transact business there.
A nonprofit organization can either be its own registered agent or have a director listed as its registered agent. This has its disadvantages. A director’s privacy can be violated if the name and address of the registered agent are made public. You can only be reached by the agent during normal business hours.
A registered agent is an entity that acts as your business’s representative. This helps to ensure that legal papers are not served at your office.
Step 4: File Articles of Incorporation With Colorado
Colorado requires that Articles of Incorporation be submitted electronically. All information required by the state must also be noted on the form.
Step 5: You must file your first periodic reports within three months of formation
You can file the Colorado Periodic Report online to keep you in good standing with the Secretary of State. You must file your second one within three months from the anniversary of your first filing. You can sign up to receive email reminders from the secretary of State so you are notified when your report is due.
Step 6: Establish corporate bylaws
Nonprofit corporations must have bylaws. These bylaws don’t have to be filed with the state, but they must be. These documents contain your organization’s rules and procedures. They must be in compliance with Colorado law. However, there is no filing requirement.
Step 7: Call an organizational meeting of the board of directors
Your board of directors must meet for the first time to appoint officers, establish an accounting period, and determine a tax year. The board must approve the initial transactions and bylaws. Keep the minutes of each meeting.
Step 8: Create a corporate records binder or another way to keep records
Important records, such as financial records and minutes, must be kept safe. This information is often kept in a records binder by Colorado nonprofit organizations. However, you can store it electronically on the internet or other digital platforms.
Step 9: Get your tax ID numbers
Your organization’s IRS identification is the federal Employer Identification Number (EIN). It is used to open bank accounts or submit tax returns.
Also, you need to register for the Colorado Sales Tax Withholding account. You will also need a number and rate for your unemployment insurance tax account if your charity employs employees and withholds income. You have several options for applying, including an online one.
Step 10: Apply to all licenses and permits
Licenses and permits may be required for your Colorado nonprofit corporation. There is no central listing. They can vary depending on the type and purpose of the organization. There are federal, state, as well as local licenses. You are responsible for obtaining all licenses and permits that you require.
Step 11: Apply to tax-exempt status
To apply for 501c(3) status with IRS, larger charities can use Form 1023. The streamlined Form 1023EZ is available for charities with incomes below $50,000. Your organization will be exempt from Colorado corporate taxes once it has been approved by the IRS for tax-exempt status. If you wish to be exempted from state sales tax, you must file an application. Local authorities will be able to provide information on exemptions from local property and sales taxes.
Nonprofits applying to be 501(c),(3) are subject to additional requirements from the IRS. A purpose clause is required and you must state that your activities will not be in conflict with your tax-exempt status. It is also important to state that assets of the corporation will be transferred to charity or government if it dissolves.
The form doesn’t have enough space for the statement. However, it can be attached as an attachment in the Additional Information section.
Step 12: Register with the state as a charity
Before soliciting donations, most Colorado nonprofit corporations must register as charities. Register on the Colorado Secretary Of State’s website.
Step 13: Get insurance for your non-profit
Each organization has its own insurance requirements based on their assets and activities. If they have employees, all nonprofits must have workers’ compensation coverage. Nonprofit corporations in Colorado should have unemployment insurance. Otherwise, they will be reimbursed directly by the state. An insurance agent qualified can help you assess your insurance requirements.
Step 14: Open an account with a bank
To ensure that your organization’s income is separate from the directors’ personal income, you will need a bank account. With your EIN, you can open a business bank account.
Colorado Business Entity Tips
Starting an LLC in Colorado involves several key steps, with the first being a Colorado entity name search to ensure your proposed business name isn’t already taken. Upon securing a unique name, you’ll then create a Colorado LLC operating agreement, outlining the internal operations of the company.
If you’re keen on privacy and you’re prepared to meet legal requirements, you can even be your own registered agent in Colorado. Though the length of time to get an LLC in Colorado varies, typically it takes a few weeks.
Once the LLC is formed, you will need to understand how to obtain an EIN, or Employer Identification Number, from the IRS for tax purposes.
There are several top LLC formation services in Colorado to guide you through this process if necessary. To further streamline the process, the best registered agent services in Colorado are available to handle legal notifications on your behalf.
Next, you’ll need to get a business license in Colorado, which can be obtained from the Secretary of State’s office. The cost to start an LLC in Colorado is relatively affordable, involving a small filing fee.
As time goes by, you may need to know how to close and dissolve a Colorado LLC, this procedures that can be handled by a Colorado registered agent.
