Incorporation

Creating Your Mark in New Jersey
A group of local citizens discovers plans for a new manufacturing facility to be built on the banks of a nearby river, upstream from their residential development. Effluents from the manufacturing process will pollute the river, creating a repugnant odor, and making it unsafe for children to swim and play. The citizens gather together and decide to fight not only the development along the river, but numerous other sources of water pollution as well. This group realizes that the environmental issues in their community are worth the time and investment to continue into the future. To maximize its resources and ensure its survival, this group decides to form a nonprofit organization and become a legally recognized corporation.

A corporation is a distinct, legal entity that allows a group of people to combine their resources for profit or nonprofit activities. Incorporation is the process by which a group becomes a corporation, and includes choosing a name, preparing a Certificate of Incorporation, and filing a Certificate with the state.

Getting Started

Before beginning the incorporation process, you should meet with your group to discuss the pros and cons of incorporation. Incorporation is often recommended because it brings many benefits that a group cannot otherwise attain. Listed below are a few of the advantages of incorporating a nonprofit organization:

  • It allows you to apply for tax-exempt status with the IRS.
  • It increases the likelihood of contributions from public and private foundations.
  • It provides limited liability to your employees and board members so they cannot be held personally liable for corporate debts or other setbacks.
  • It creates separate, legal entity that exists in perpetuity, even if trustees change.

Some of the disadvantages include the cost, the paperwork, and the time and energy associated with incorporating. Consider all advantages and disadvantages and meet with an attorney before deciding whether or not incorporating is right for your group.

Use this checklist to assist your organization with the incorporation process. Keep in mind that this list is a general summary.

  • Find a Lawyer (preferably one who will work pro-bono)
  • Obtain Incorporation paperwork
  • Choose a Corporate Name
  • Check Name Availability
  • Reserve a Corporate Name
  • Perform a Name Search
  • Protect Your Name (if necessary)
  • Prepare Certificate of Incorporation
  • File Certificate of Incorporation
  • Apply for EIN number
  • Prepare Bylaws
  • Prepare Membership Provisions
  • Prepare and File Your Federal Tax-Exemption Application
  • Obtain State Corporate and Sales Tax-Exemption

helpful_hint Helpful Hints The state of New Jersey provides a “Checklist for Starting a Business in New Jersey for groups that wish to incorporate.The law is constantly changing; visit the IRS website for more information. Also consult an attorney or certified public accountant to ensure the correct preparation of forms

As of 2006, organizations must file their annual report online. Each year your organization needs to renew your incorporation status. To file electronically, a nonprofit will need to go to the State’s website. Failure to file forms and pay the annual fee for two consecutive years results in dissolution of the corporation.

The work does not stop once you obtain your Certificate of Incorporation. Refer to the other sections of this website, but keep the following tips in mind as you work to build your organization:

  1. Consult a lawyer for assistance with incorporating and obtaining tax-exempt status.
  2. Develop a mission statement that appeals to a wide audience. Avoid jargon or technical language only understood by those in the field.
  3. Create Bylaws as a living document. Use them to identify and establish key policies and procedures upfront, but also review and revise them periodically with board and staff involvement.
  4. Write job descriptions for board members, clearly stating their role and responsibilities.
  5. Seek individuals to sit on your board who are willing to commit time and energy to your organization and make the interests of the organization a priority.
  6. Recruit board members using criteria similar to that used to hire new staff. Look for responsible, dedicated individuals that can contribute expertise in a specific area, such as finance or law. Board members can make a huge contribution to your organization; therefore, take time and care to choose the right people for the job.

For more information, read NJ Center for Nonprofits publication, Thinking of forming a nonprofit? What to consider before you begin.

Further Resources

  • Center for Non-Profits  Provides guidance to charitable organizations on a wide range of issues such as incorporating, obtaining 501(c)(3) tax-exempt status, insurance, and board development.
  • USA.Gov for Nonprofits Highlights resources in numerous areas of running a nonprofit including tax-exempt status, incorporating, and more.
  • State of New Jersey, Division of Taxation Questions and answers about starting a nonprofit organization including information on getting organized, incorporating, and obtaining Federal and State tax-exempt status. Phone: (609) 292-6400
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