Do you want to know the legal requirements you need to start a non-profit organization? If YES, here is a checklist of non-profit licenses, permits & insurance.
We will consider what it takes to get operating license and permit for your non-profit/foundation including insurance coverage and intellectual property protection.
- Best legal entity to use for this type of business
Of course starting a non – profit foundation will require that you have the foundation registered, as well as apply for any requirement as stated by the states you want to operate from. As such, you have got to make the necessary enquiries so that you can know where and where to go for the registration of your business in your city.
List of Legal Documents You Need to Run a Non-Profit
- Certificate of Incorporation
- Business License
- Business Plan
- Memorandum of Understanding
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement
- Foundation’s By – laws for Corporations / Constitution
- Charity law
- Policies and Procedures
- Minutes of the foundation meeting or first directors meeting
- Articles of Incorporation
- Minutes of All Annual and Special Meetings of Board of Directors and Members
- Membership Roster listing names and addresses of current members
- Governing Documents
- Insurance Policy
Getting a Nonprofit Business License, Permit & Insurance
Nonprofit Business License
A business license refers to the local business registration that is given to all businesses in a particular area. In order to get a business license, an inspection will not be required unlike a permit. Just like any other business, nonprofits need a business license; however, the business license tax is waived upon presentation of proof that the business has a non-profit status.
Business licenses are usually issued by the local government to organizations that are located in its jurisdiction. It is also up to them to review the approval of the physical location for businesses and nonprofit organizations based on zoning ordinances. These factors usually mean that a tax-exempt organization must request a business license from its local government and comply with zoning, reporting and labor laws that apply.
- Tax-exempt Status
Tax –exempt statuses are granted by the IRS (Internal Revenue Service). In order to obtain the 501c3 classification, an organization must provide documentation of its mission, organizational capabilities, board members and operating budget. The organization’s charter and status also require certification from a state government that registers businesses and organizations, in accordance with local laws.
To apply for your exemption, you must complete IRS Form 8718, User Fee for Exempt Organization Determination Letter Request, and IRS Package 1023, Application for Recognition of Exemption.
After the IRS reviews your application, they will send you a letter to indicate that your business has been granted a tax exempt status, or they may ask you to send across more information about your nonprofit. The IRS also reserves the right to out rightly deny an application. If this should happen to you, you should get the service of a lawyer who is experienced in handling non-profit matters.
- State tax exemption (if necessary)
In some states such as California, Montana, North Carolina and Pennsylvania, you must complete a separate application to get a state tax exemption. In most states however, as long as you have filled your nonprofit articles of incorporation and obtained your federal 501(c)(3) tax-exempt status, your state tax exemption will be automatically be granted. In still others, to get your state exemption you must send in a copy of the IRS determination letter that granted your federal exemption.
- Federal Employer Identification Number
All nonprofit organization are required to obtain a federal tax number, also referred to an Employer Identification Number, in other to meet federal requirements. This is a number the federal government and many state and local government agencies use for records rather than one person’s social security number. This filing is normally completed during the incorporation process. No business license is required for nonprofits at the federal government level.
Is Professional Certification Needed to Run a Non-Profit?
You would need a professional certification if you decide to start a non – profit organization in a particular field. For example, if you want to run a non – profit foundation that offers services in the health sector, you would need to apply and obtain a certification from the required medical association in your country.
Generally, anybody who decides to start a non – profit foundation may not require a professional certification aside from the license and permits to operate as a non – profit organization. As a matter of fact, each state in the U.S. has their own requirements for non – profit organization; you can check up the necessary requirements from the states that you intend starting your foundation from.
Insurance Cover for Non-Profit Organizations
Depending on the angle of operation you want to start from, there are several areas of insurance that has to be tackled. Some of the insurance cover that an average Non – profit organization should have include;
- General insurance
- Health insurance
- Liability insurance
- Workers Compensation
Unemployment insurance: nonprofits that have employees are required to have this in most states. You should contact your state’s Department of Labor to get started.
Intellectual Property Protection for Non-Profit Organizations
The nature of services a non – profit organization offers will determine if there would be the need to seek for intellectual property protection. For example; if you run a non – profit foundation that is involved in empowering people and you have some training modules or a guide that is unique to your organization, then you can file for an intellectual property protection.
Generally, if your foundation is involved in the production of arts, music and inventions, you can file for intellectual protection of any unique products that comes out of your organization. But if a non – profit organization is offering services that is not unique to them, there is no need to enforce intellectual property protection. Besides, most non – profit organization duplicate what is already in existence.