How to Start a Nonprofit in North Carolina: The Best Guide

1 – Craft Your Mission

Building a nonprofit organization in North Carolina begins with defining its mission. More than mere words, this statement embodies the essence of the organization, detailing its reason for existence, whom it serves, and how it serves them.

Significance of a Precise and Well-Defined Mission

A sharply defined mission is vital for various reasons:

• Guidance and Concentration: It provides direction, ensuring that everyone involved focuses on the primary objective without being distracted.
• Strategic Choices: It aids in decision-making, helping to determine which activities align with the organization’s goals.
• Garnering Support: It can draw volunteers, donors, and grants, especially when they understand its local relevance.
• Responsibility: The mission statement sets a standard for accountability, allowing stakeholders to evaluate the organization’s success.

Crafting a Meaningful and Influential Mission Statement

Formulating a mission statement that resonates requires careful planning. Here’s a roadmap:

• Recognize Your Objective: Identify the unique issues or needs that your organization intends to address within the state.
• Pinpoint Your Target Beneficiaries: Define who will benefit most from your services.
• Outline Your Strategy: Describe how you will realize your goals, considering local needs and resources.
• Be Brief and Transparent: Your mission statement should be succinct and clear, avoiding technical jargon.
• Stir and Encourage: Although clarity is vital, your mission statement should also inspire and motivate, reflecting your commitment to your cause.

Example Mission Statements

Here are examples from nonprofits that effectively serve communities within the state:

• North Carolina Coastal Federation: “To protect and restore the water quality and critically important natural habitats of the coast.”
• Food Bank of Central & Eastern North Carolina: “Nourish people, build solutions, and empower communities by providing nourishment to families, children, seniors, and individuals.”

These statements lucidly outline each organization’s intent and method, and they reflect a deep understanding of the unique culture and needs of the communities they serve.

2 – Laws and Regulations for Nonprofits in North Carolina

Nonprofit organizations across the U.S., including in North Carolina, are subject to specific regulations. These guidelines govern their establishment, daily operations, and dissolution. In North Carolina, the key piece of legislation is the North Carolina Nonprofit Corporation Act. This act defines the legal framework for nonprofits within the state. Here are some of the state-specific laws and regulations:

State-Specific Laws and Regulations

• Formation of Nonprofit Corporations: Nonprofits in North Carolina are established by filing articles of incorporation with the North Carolina Secretary of State. This document must include particular details like the corporation’s name, its initial registered office and agent, and a declaration of the corporation’s purpose.
• Board of Directors: North Carolina law mandates specific rules regarding the composition and functioning of a nonprofit’s board of directors. There must be at least one director, and they must convene at least once annually.
• Conflict of Interest: Directors and officers must abstain from conflicts of interest and always prioritize the organization’s welfare. Breach of these provisions may result in legal repercussions.
• Reporting Requirements: North Carolina nonprofits are required to submit an annual report to the Secretary of State.
• Tax Exemptions: Some nonprofits might qualify for exemptions from state taxes, such as sales and use taxes. However, they must fulfill certain criteria and apply to the North Carolina Department of Revenue for these exemptions.

Importance of Compliance with These Laws

• Maintaining Good Standing: Adhering to state laws ensures that the nonprofit keeps its good standing status within North Carolina, crucial for continued operations and eligibility for grants or other funding.
• Preventing Legal Penalties: Nonadherence can result in legal penalties, including fines or revocation of the nonprofit’s corporate status.
• Protecting Reputation: Compliance reinforces the nonprofit’s reputation. Noncompliance might lead to negative public perception, impacting donations and volunteer participation.

Steps to Ensure Adherence to These Laws and Regulations

• Understand the Requirements: Familiarizing oneself with what the law demands is the first step towards compliance. Consultation with a legal expert specializing in North Carolina’s nonprofit law may be necessary.
• Develop Policies and Procedures: It’s advisable for nonprofits to draft written policies and guidelines outlining their compliance strategies.
• Regular Review: Regular evaluation of the organization’s activities by the board of directors ensures alignment with legal requirements.
• Professional Advice: Obtaining legal and accounting guidance ensures fulfillment of all legal and financial reporting obligations.
• Ongoing Training: Regular training for board members and staff ensures everyone’s understanding and adherence to the legal mandates.

These guidelines, tailored to North Carolina, provide a comprehensive overview of the legal landscape that nonprofits must navigate within the state, emphasizing both the importance of compliance and the steps required to achieve it.

3 – Choose a Name

When establishing a nonprofit organization in North Carolina, selecting the right name is a crucial step. The name you choose has the potential to make your organization stand out, articulate your mission and values, and contribute to a robust brand identity.

The Role and Significance of a Nonprofit’s Name

• Recognition: A memorable and distinctive name aids in keeping your organization at the forefront of people’s minds, which is vital when soliciting donations or applying for grants within North Carolina.
• Conveys Mission and Values: A well-chosen name communicates your nonprofit’s mission and values quickly, helping potential donors, volunteers, and beneficiaries understand what you stand for.
• Branding: As part of your brand, the name can set you apart from other organizations in North Carolina, creating a unique presence that resonates with your target audience.

Guidelines for Choosing a Suitable Name

• Reflect Your Mission: Opt for a name that mirrors your organization’s purpose or the cause it champions.
• Keep it Simple: Straightforward, concise names are often easier to remember. Steer clear of complicated terms or industry jargon.
• Make It Unique: Select a name that doesn’t overlap with other organizations, especially those in similar fields in North Carolina.
• Consider Internet Availability: Ensure that the corresponding domain name is accessible for your website and think about how it will appear in email addresses or social media.
• Avoid Restricted or Prohibited Names: Refrain from using names that may imply a governmental association or could be misleading.

Procedure for Checking Name Availability

Before registering your nonprofit’s name in North Carolina, you must ascertain that it’s not already employed by another entity. Follow these steps:

• Online Search: Start by conducting a name search on the North Carolina Secretary of State’s business name database. This will reveal if the name you intend to use is taken by another corporation within the state.
• Trademark Search: Consider checking the U.S. Patent and Trademark Office’s trademark database to prevent infringement on existing or pending trademarks.
• Reserve the Name: If the name is available, you may reserve it for a duration of 120 days by filing a name reservation application with the Secretary of State in North Carolina and remitting the appropriate fee.

Keep in mind that simply being available does not make a name suitable. Ensure that your selected name complies with all North Carolina naming regulations. It’s often wise to consult with an attorney to verify that your nonprofit’s name won’t contravene any state laws or regulations.

4 – Create Bylaws

Bylaws are a vital foundational document for any nonprofit organization, functioning as the governing guidelines that define its structure and operation. In North Carolina, bylaws should be crafted with careful consideration of the state’s laws and the specific needs of the organization.

The Significance of Bylaws in Running a Nonprofit

• Providing Structure: Bylaws in North Carolina lay out a well-defined structure for the nonprofit, detailing the roles and responsibilities of board members, officers, and other vital figures.
• Guiding Decision-Making: These rules serve as a blueprint for decision-making within the organization, stipulating how decisions are made and disputes resolved.
• Ensuring Legal Compliance: Bylaws in North Carolina ensure that the nonprofit functions within the bounds of applicable state laws and regulations.
• Instilling Confidence: By demonstrating that the organization operates with transparency and accountability, bylaws can inspire trust in donors, volunteers, and other stakeholders.

Key Elements That Should Be Included

• Organization’s Name and Purpose: This outlines the formal name of the nonprofit and its mission.
• Board of Directors: This details the board’s composition, the selection process for directors, terms of office, roles, responsibilities, and meeting procedures.
• Officers: This defines the officer roles (e.g., President, Secretary, Treasurer), their duties, and the process for selection and terms of office.
• Committees: If applicable, this section explains the creation and roles of committees.
• Membership: If there are members, this outlines their eligibility, rights, responsibilities, and procedures for meetings.
• Conflict of Interest Policy: This section describes how potential conflicts of interest will be addressed.
• Amendments: This stipulates the process for modifying the bylaws.
• Dissolution: This defines the process for dissolving the organization, including asset distribution.

North Carolina-Specific Requirements

In North Carolina, there are particular considerations and guidelines for nonprofit bylaws:

• Adoption and Amendment: The organization’s incorporators or directors adopt the initial bylaws in North Carolina. Unless stated otherwise in the articles of incorporation or bylaws, the board of directors has the authority to amend the bylaws.
• Required Provisions: While North Carolina law doesn’t dictate specific provisions to include in bylaws, it often covers matters such as the number of directors, classes of membership, and procedures for members’ meetings.
• Consistency with Law and Articles of Incorporation: The bylaws must align with North Carolina law and the organization’s articles of incorporation.
• Emergency Bylaws: North Carolina law permits nonprofits to incorporate provisions in their bylaws for managing the organization during an emergency, such as natural disasters.

By carefully considering these factors and tailoring the bylaws to the nonprofit’s unique needs, organizations in North Carolina can establish a strong foundation for governance and operation. Consultation with a legal expert in North Carolina nonprofit law may be advisable to ensure complete compliance with all relevant regulations.

5 – Form a Board of Directors

In North Carolina, the board of directors is instrumental in shaping and guiding a nonprofit organization. The board oversees key aspects of the organization’s activities, ensuring alignment with its mission, compliance with laws, and financial sustainability.

The Role and Significance of a Board of Directors

• Strategic Direction: The board steers the organization’s course, aligning its activities with its mission and objectives.
• Financial Oversight: It ensures financial responsibility, aligning resources with the mission, and maintaining sustainability.
• Policy Making: The board formulates policies that direct the organization’s operations and activities.
• Compliance and Accountability: The board verifies compliance with all relevant laws and regulations and maintains accountability to stakeholders.
• Leadership Selection: This involves hiring, evaluating, and, if necessary, dismissing the chief executive.

Steps to Forming an Effective Board of Directors

• Identify Needed Skills and Experience: Determine the necessary skills and experience for the board, aligned with the organization’s mission and goals.
• Recruit Board Members: Find potential board members who have the required skills and commitment to the mission.
• Establish Board Structure: Define the board’s size, roles, and responsibilities, as outlined in the bylaws.
• Provide Orientation and Training: Acquaint new board members with the organization and their roles and provide ongoing training.
• Evaluate Board Performance: Regularly assess the board’s collective performance and that of individual members to ensure effective support for the organization.

North Carolina-Specific Requirements for Board Members

In North Carolina, the following rules apply to the structure and activities of nonprofit boards:

• Number of Directors: Under North Carolina law, a board must have at least one director, but more are typically specified in the organization’s bylaws.
• Qualifications: North Carolina law requires directors to be individuals, but does not specify additional qualifications unless outlined in the articles of incorporation or bylaws.
• Election and Term of Office: Directors are elected according to the procedures detailed in the bylaws or articles of incorporation.
• Meetings: The board should meet as stipulated in the bylaws, with at least one meeting annually.
• Quorum and Voting: Unless the bylaws or articles of incorporation define differently, usually a majority of directors form a quorum, and a majority vote of those present at a meeting where a quorum is present typically makes most decisions.

These regulations provide a baseline for governance in North Carolina. However, best practices may suggest more stringent rules in the bylaws to ensure a diverse, active, and effective board, tailored to the particular needs and mission of the organization. Engaging with an attorney experienced in North Carolina nonprofit law might also be beneficial to ensure full legal compliance.

6 – File Articles of Incorporation

Articles of Incorporation, sometimes known as the charter document or corporate charter, is the foundational document filed with the state to legally establish your nonprofit corporation in North Carolina.

The significance of this document includes:

• Legal Establishment: The Articles of Incorporation legally create your organization as a separate entity, offering liability protection for directors, officers, and members.
• Regulatory Compliance: This document outlines the structure and purpose of your nonprofit, demonstrating your lawful intent and commitment to abide by state regulations.
• Fundraising and Tax Exemptions: These Articles are necessary for applying for tax-exempt status both federally and at the state level and are often required for grants or other funding applications.

Steps to Filing Articles of Incorporation

• Prepare the Articles of Incorporation: Draft the document, ensuring that it includes all required information as per North Carolina laws.
• Submit the Document: File the Articles of Incorporation with the North Carolina Secretary of State’s office. You may do this online, by mail, or in person.
• Pay the Filing Fee: There is a filing fee required; make sure to check the current fees on the North Carolina Secretary of State’s website.
• Wait for Approval: Once submitted and the fee is paid, the North Carolina Secretary of State will review your document. If all is in order, they will approve it and return a certified copy to you.

Key Information to Include

The exact requirements may vary, but typical information to include in your Articles of Incorporation in North Carolina are:

• Name of the Corporation: The official name of your nonprofit.
• Purpose: A detailed statement of the organization’s purpose, which should meet IRS requirements for tax-exempt status.
• Registered Agent and Registered Office: The name and address of your registered agent in North Carolina, authorized to receive legal documents on behalf of the organization.
• Directors: Information about the number of directors or how they will be selected or elected.
• Members: Details about the members of the organization if there are any.
• Dissolution Statement: A description of how the nonprofit’s assets will be distributed upon dissolution, in compliance with IRS requirements for tax-exempt status.
• Incorporator(s): The name and address of the person(s) responsible for preparing and filing the Articles.
• Duration: The life span of the corporation, if it is not perpetual.

7 – Obtain an Employer Identification Number (EIN)

After forming your nonprofit corporation in North Carolina, the next essential step is to obtain an Employer Identification Number (EIN). Also known as a Federal Tax Identification Number, this unique nine-digit number is assigned by the Internal Revenue Service (IRS) to identify your organization for tax-related purposes.

In North Carolina, the EIN serves several critical functions:

• Federal Tax Returns: Your nonprofit must use the EIN when filing federal tax returns.
• North Carolina State Tax ID: To obtain a state tax ID number in North Carolina, your EIN is usually required.
• Banking: North Carolina banks generally require an EIN to open an account in the organization’s name.
• Hiring Employees: If your nonprofit hires employees in North Carolina, you’ll need the EIN for wage reporting.
• Licenses and Permits: An EIN may be needed for various licenses and permits within the state.

Step-by-Step Guide on How to Apply

1. Verify Eligibility: Ensure your organization is in the U.S. or U.S. Territories, including North Carolina. The online applicant must have a valid Taxpayer Identification Number (SSN, ITIN, EIN).
2. Prepare Information: Have information like the entity’s legal name, responsible party’s name and SSN/ITIN/EIN, North Carolina mailing address, and other organizational details ready.
3. Apply Online: Visit the IRS website to fill out the application form. The application must be done in one session; you can’t save an incomplete form.
4. Receive EIN: You’ll immediately receive the EIN upon application completion. A confirmation notice is available to download, save, and print.

Using an EIN in North Carolina

• Bank Accounts: Open bank accounts for your nonprofit using the EIN.
• Federal and State Tax Filings: File both federal and state tax returns in North Carolina using the EIN.
• Employee Paperwork: Use the EIN on W-2 forms and other employment documents if your organization has employees in North Carolina.

Remember, the EIN is permanent and will remain with your nonprofit as long as the organizational structure remains unchanged. Always keep your EIN secure and easily accessible. You’ll use it often when running your North Carolina nonprofit. If you have specific questions, don’t hesitate to ask. Seek out a North Carolina legal or tax professional for extra help with obtaining an EIN.

8 – Apply for Tax Exemption

For nonprofit organizations in North Carolina, securing tax-exempt status is a pivotal step. Achieving this status under section 501(c)(3) of the Internal Revenue Code exempts the organization from federal corporate income taxes on income related to its mission. This exemption comes with several benefits:

• Access to many public and private grants.
• Contributions to 501(c)(3) nonprofits may be tax-deductible.
• Possible lower postal rates for bulk mailings.

Federal Tax-Exempt Status

1. Prepare your Application: Complete Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3)). Small nonprofits might qualify for Form 1023-EZ.
2. Submit your Application: Send the application and required supporting documents to the IRS.
3. Pay the Application Fee: Pay the required fee, dependent on your organization’s budget.
4. Await the Determination Letter: Receive a letter from the IRS confirming the exemption.

State-Level Tax Exemptions

North Carolina has specific exemptions:

• Exemption from Corporate Income Tax: North Carolina typically recognizes the federal 501(c)(3) exemption, so there’s no separate application for state corporate income tax.
• Sales and Use Tax Exemption: Nonprofits can apply for exemption from sales and use tax by filing Form E-595E with the North Carolina Department of Revenue.

North Carolina-Specific Requirements

• Eligibility: The organization must operate exclusively for charitable, religious, educational, or scientific purposes.
• Apply for Exemption: Submit Form E-595E to the North Carolina Department of Revenue for sales and use tax exemption.
• Ongoing Compliance: Maintain compliance with federal and state regulations to retain your tax-exempt status.

It is important to note that tax-exempt status imposes ongoing restrictions and requirements. These include limitations on political activities and the need for annual tax return filings. Noncompliance may result in revocation of the status.

It’s wise to consult with legal or tax professionals familiar with North Carolina laws to guide you through the application process and ensure all regulations are met. The North Carolina Secretary of State’s office and the North Carolina Department of Revenue provide resources and support for nonprofit organizations seeking tax-exempt status in the state.

9 – Obtain Necessary Licenses and Permits

Even as a nonprofit organization, there are likely a number of licenses and permits you’ll need to legally operate in North Carolina. Ensuring you have the proper licensing is a key part of running a compliant nonprofit.

Why Licenses and Permits are Necessary

• Legal Compliance: Obtaining the necessary licenses and permits ensures that your organization operates within local, state, and federal laws.
• Public Trust: Proper licensing can increase the public’s trust in your organization, encouraging donations and support.
• Avoiding Penalties: Without the required licenses and permits, you may face fines, sanctions, or closure.

Overview of Common Licenses and Permits

The required licenses and permits can vary depending on your nonprofit’s activities. Common ones may include:

• Charitable Solicitation License: Nonprofits in North Carolina that solicit donations must register with the North Carolina Secretary of State’s Charitable Solicitation Licensing Division.
• Business License: Some local governments may require a basic business license to operate within the city or county.
• Fundraising Event Permits: Special permits may be needed for events like raffles or bingo, overseen by the North Carolina Gaming Commission.
• Sales Tax Exemption: As previously mentioned, qualifying nonprofits will need to file Form E-595E with the North Carolina Department of Revenue.

Procedure for Obtaining These Licenses and Permits

1. Charitable Solicitation License: File a registration statement with the North Carolina Secretary of State before soliciting contributions. Forms and requirements can be found on their website.
2. Business License: You should check with your local city or county government office to determine if you need a basic business license and learn the process for obtaining it.
3. Fundraising Event Permits: For charitable gaming activities, consult the North Carolina Gaming Commission’s website for application forms and procedures.
4. Sales Tax Exemption: Submit Form E-595E to the North Carolina Department of Revenue for exemption from sales and use taxes.

Every nonprofit is unique, and specific licenses and permits may vary. Thorough research and professional consultation can ensure full compliance with all legal requirements in North Carolina.

Resources are available through North Carolina’s state agencies, including the Secretary of State’s office and the Department of Revenue, to guide nonprofits through this process. The North Carolina Center for Nonprofits is another valuable resource, providing support and guidance to nonprofit organizations throughout the state.

Conclusion