How to Form a Nonprofit in Indiana

Posted on Wednesday, May 20, 2015

Are you interested in forming a nonprofit corporation in Indiana?

Here are the basic steps of creating a nonprofit organization in Indiana; however, you may want to consult your lawyer or accountant before beginning to ensure you are completing all of the steps properly.

1. Choose a business name.  The name must contain either "corporation," "incorporated," "limited," "company," or an abbreviation of these.  Once you have decided on a name, you will need to apply for an Employer Identification Number (EIN) with the IRS.  An EIN is also known as your Federal Tax Identification number used to identify your organization.  There is no fee for obtaining an EIN and you can apply online.  Your EIN is NOT your tax-exempt number.  If a nonprofit organization fails to file the required form with the IRS for 3 consecutive years, it will lose its exempt status.  This 3 year period begins when you apply for your EIN.

2. Recruit board members.  The Indiana Nonprofit Corporation Act of 1991 governs nonprofit corporations in Indiana.  According to the code, nonprofit organizations must have at least 3 board members.  Unless otherwise provided in the articles of incorporation or bylaws, a corporation must have a president, secretary and treasurer.

3. File articles of incorporation.  Articles of incorporation must be filed with the Indiana Secretary of State along with a $30 filing fee.  Articles of incorporation are required to include the following:

1. Corporation's name.

2. One of the following statements:

a. "This corporation is a public benefit corporation."

b. "This corporation is a mutual benefit corporation."

c. "This corporation is a religious corporation."

3. The corporation's address.

4. The name and address of each incorporator.

5. Whether or not the corporation will have members.

6. Provisions that are not inconsistent with any law regarding the distribution of assets on dissolution.

The IRS provides a sample articles of incorporation for nonprofit organizations.

4. Create bylaws.  Each organization is required to adopt bylaws that manage the affairs of the organization. There is no specific wording required in bylaws; however, they usually include details on officers' duties, board meetings, etc.

5. Apply for tax exemption.  In order to file for tax exemption with the IRS under Section 501(c)(3), the organization must have an exempt purpose.  Its assets must also be permanently dedicated to an exempt purpose.  The latter is shown in the articles of incorporation by including wording that upon dissolution of the organization, assets shall be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code for a public purpose.  Form 1023 is used to file for exemption under 501(c)(3) of the code along with a filing fee of either $400 or $850 depending on annual gross receipts.

6. Wait.  After you have submitted your application to the IRS, you will receive a letter acknowledging that they have received your application.  This is NOT approval of your exemption.  It normally taxes the IRS several months to review and approve your application.  They may also request additional information from you if the application is incomplete.  Once approved, the IRS will issue a determination letter recognizing tax-exempt status.  It is important that you keep this letter.

7. File for exemption from state sales tax.  Once you have received your federal tax exemption, you can file for exemption from Indiana sales tax by completing Form NP-20A.  There is no fee required with this form.  In order to maintain exemption from Indiana sales tax, the organization must file Form NP-20, Nonprofit Organization's Annual Report annually with the Indiana Department of Revenue.

Once your organization has received its tax-exempt status, there are ongoing reporting and compliance that must be met to maintain that status.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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