How to Start a Nonprofit Profit in NY State

Posted: December 2nd, 2013





How to Start a Nonprofit Profit in NY State

Majority of those thinking of starting a nonprofit do not know that the process is similar to starting a small business. Starting a nonprofit organization in the state of New York requires a clearly stated mission, dedication and time. Starting a nonprofit in New York State can be a difficult process especially when the main details are not followed. These details may be concrete – setting up payroll, financial systems, hiring staff, opening a bank account, and purchasing the correct insurance- or conceptual- mission statements, organizational structure, and evaluation (Citizen Media Law Project, 1). While the main objective of running a nonprofit involves achieving its mission- whether staging theater performances or providing shelter for the homeless – forming a nonprofit entails running a business.

Most nonprofit organizations formed normally revolve around literary, educative, scientific, or charitable purposes. The New York State requires a nonprofit corporation to be managed by a minimum of three incorporators. The term incorporators stands for natural persons aged 18 and above. The incorporators sign the incorporation certificate. Every corporation needs to have a reference name and one that is not similar to another corporation registered by the Department of State in New York (Citizen Media Law Project, 1). The department makes available the names of nonprofit organizations in a website. New York State requires the name of the corporation to include the word “limited”, “incorporated”, or “corporation” unless it has been formed for religious or charitable purpose. However, New York State prohibits the use of certain terms when naming an organization.

Starting a nonprofit in New York also involves registering an incorporation certificate and an application for tax exemption from the IRS. The incorporation certificate is supposed to be filled with the corporation’s basic information including the name, purpose statement, state provisions and purposes, and address of the person to receive legal notices (registered agent). The state department thereafter issues a legitimate filing receipt to the person filing for the certificate. The filing receipt indicates the filing date, corporation name, an account of fees paid, and an extract of the information contained in the certificate of incorporation. Additionally, the filing receipt is supposed to act as proof for filing. It should therefore be kept together with the permanent records of the corporation. The New York department state does not issue replacement-filing receipts for those destroyed or lost (New York Department of State, 1).

For purposes of receiving a tax exemption status, the application with the IRS requires the use of specific language is required such as a clause that dedicates the assets of the corporation to another nonprofit when the venture ends. It is also necessary to make an application for federal tax exemption prior to making the application with the IRS. Obtaining this exemption requires completing an IRS form 1023. This form requires filling out details about the organization such as organizational structure, finances, operations, government polices, and history.

Additionally, New York State requires every nonprofit to prepare by laws in compliance with the law (New York Department of State, 1). These by laws should contain procedures and rules the corporation is supposed to follow when electing directors and officers, holding meetings, and handling corporate formalities in the state. However, it is prudent to understand that it is not mandatory to register the by laws with the State Department. Success, in this part, enables tax exemption from sales, income, property, and other taxes. Depending on the activities of the corporation, there will be a need to apply for registration with the attorney general in New York before performing fundraising activities.

There are fundamental provisions that need to be adhered to when a draft of the corporation’s by-laws is being formulated. One is the director’s quorum and includes majority or otherwise as provided by the incorporation certificate. Should the number of directors be less than fifteen, the quorum should not be less than a third of the directors. If the directors exceed fifteen, then the quorum stands at five plus an allowance of one member for every ten additional directors (Nolo, 1). The by-laws should also provide the period the directors are supposed to serve in office. This period is recommended to last five years.

The member’s quorum is another provision in the by-laws. It should be taken as provided in incorporation certificate. It is recommended at not less than ten percent of the members voting. The final provision to be included in the Bylaws-laws involves the officer’s requirements. One person is allowed to hold three or more offices apart from the secretary and the president of the organization. The term to be served by the officers is provided in the by-laws or the Articles. If nothing has been specified, the officers are then expected to serve an office term of one year.

The state of New York requires the corporation to keep complete and correct records and books of account. Additionally, the corporation is supposed to write down minutes of the members’ proceedings, executive committee, and board of directors. The corporation also has to maintain a record that contains the addresses and names of all members, the total of capital certificates kept by every member as well as the dates when the members became recognized as owners of the records. Additionally, the corporation is supposed to hold a meeting of the members on an annual basis for purposed of electing directors and transacting other businesses. Payment of fees and services to the New York state department is done can be done through the Mastercard, American Express, and Visa. Expenses for service of process, name availability, certificates under seal, and documents issued can be paid through the debit card or the credit card. All filing documents and written requests may be delivered or faxed to the state department apart from the process service (NorthWest Registered Agent, 1).

In conclusion, starting a non-profit corporation in the state of New York together with its filing is a daunting process as well as a learning experience. Ultimately, this process introduces parties responsible for the incorporation with to all the legal systems and processes to be adhered to by the state department in New York. Indeed, it is a complicated process, but there is an alternative way of executing the action and this involves outsourcing to a professional lawyer or a provider of incorporation services (Nonprofit Coordinating Committee of New York, 1). However, it is prudent to understand that these two alternatives are much more costly compared to undertaking the entire process of incorporation. Furthermore, it is advised that a lawyer should not be allowed to formulate unilaterally the by-laws or incorporation certificate. This is because the two documents have a large effect on how they govern the functions of the corporation in New York. Therefore, such matters should not be handled by someone without the best interests of the corporation.


Works Cited

Citizen Media Law Project. Forming a Nonprofit Corporation in New York. Legal guide navigation. Dec 15 2012. Web. Dec 15 2012.

New York Department of State. Not-For-Profit Corporation FAQS. Corporations, state records and UCC. July 23, 2011. Web. Dec 2012.

Nolo. How to Form a New York Nonprofit Corporation. The steps to from a 501©(3) nonprofit corporation in New York. August 03, 2011. Web. Dec 15 2012.

Nonprofit Coordinating Committee of New York. The Things You Gotta’ Do to Start a Nonprofit Organization. March 28, 2012. Web. Dec 15 2012.

NorthWest Registered Agent. New York Non Profit Organization. How to start a nonprofit organization in the state of New York. September 13, 2009. Web. Dec 15 2012.


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