Thinking about starting a non-profit? Non-profits play a pivotal role in our economy and our communities. In fact, according to Urban Center's National Center for Charitable Statistics, the nonprofit sector contributed an estimated $985.4 billion to the US economy in 2015, composing 5.4 percent of the country's gross domestic product (GDP). [source]
In recent years, the non-profit sector has grown. Between 2005 and 2015, nonprofits registered with the IRS increased by 10.4 percent to 1.56 million nonprofits in the U.S. [source] But that doesn't mean there isn't more opportunity in this sector. If you see a need in your community, starting a non-profit might be a great way to provide lasting positive impact.
The good news is that starting a non-profit in Delaware is easier than you might think. Starting a non-profit is a similar process to starting a typical corporation except that there are additional steps to take with the federal government once you have the Delaware non-profit formation documents.
Let's break down what types of businesses qualify as non-profits and how you begin the process of forming one.
What Types of Businesses Qualify as Non-Profits
Most people think of charitable organizations when they think of non-profits. That's mostly true! Of the non-profit organizations registered with the IRS, 501(c)(3) public charities accounted for just over three-quarters of revenue and expenses for the nonprofit sector as a whole ($1.98 trillion and $1.84 trillion, respectively) [source].
That said, there are many types of groups that exist that qualify as non-profits. Some examples include homeowners associations, unions, social clubs, and chambers of commerce.
You will need to determine which type of exempt organization that your non-profit falls under.
Exempt Organization Types
- Charitable Organizations
- Churches and Religious Organizations
- Private Foundations
- Political Organizations
- Other Non-Profits
It's important to note that not all non-profits are tax exempt. If you have concerns about whether your non-profit will qualify as tax-exempt, contact your attorney or accountant before beginning the Application for Recognition of Exemption with the IRS (more on that below).
Choose the Name of Your Non-Profit
If you're starting a non-profit, there's a good chance you've already come up with a name. The name you choose will be on your formation paperwork. Keep in mind that it is possible that the name you select may already be in use and you will have to select another name.
In Delaware you are required to have one of the following company endings for your non-profit:
You must include all desired punctuation. For instance, if you'd like a comma between the company name and company ending, you must add that to your online form (more on the ordering process below) or paperwork.
Form a Delaware Non-Profit Corporation
You have two options when forming a Delaware non-profit; you can either fill out the paperwork yourself and submit it to the state or you can utilize an online service like The Incorporators to complete and submit it on your behalf.
If you opt to complete the application yourself, you can find the full directions on the state website here. You will have to name a Delaware Registered Agent. Delaware residents may act as their own registered agents but most choose not to. Read more about acting as your own registered agent here. If you live out of state or would like to use us as your registered agent, you can name us as your registered agent by ordering here.
If you use The Incorporators to form your non-profit, you simply fill out the online form found here and complete the checkout process.
Upon receipt of your order and payment, The Incorporators Ltd. will prepare and file your Articles of Incorporation/Formation with the Delaware Secretary of State. You will receive a file-stamped copy of your Articles via email within 3-5 business days. Expedited services are available.
That's it! Your Articles of Incorporation is essentially the birth certificate of your non-profit.
Obtain an Employer Identification Number for an Exempt Organization
Generally after forming any type of new entity, the next step is to apply for an Employer Identification Number (EIN) with the IRS. You can apply online for an EIN. Learn more about that process here.
File an Application for Recognition of Exemption with the IRS
Before you begin your application, look over this helpful page to ensure that you have everything you need before applying for tax exempt status.
Learn more about exempt organization types here. You will then have to determine what type of tax exempt status you want. Most charitable, religious, and educational foundations fall under the category of 501(c)(3). You can find the categories and corresponding forms on the IRS website here.
Once you've determined this, complete the corresponding form and submit all supplemental paperwork. You will need to submit the articles of incorporation that you received when you formed your non-profit, as well as other official documents.
The IRS provides detailed directions here, should you run in to any issues.
Starting a non-profit is a big step, but it doesn't mean the process has to be overwhelming. In fact, after you finish the steps above, check out our list of basic tasks to add to your to-do list to get your non-profit started off right.
If you have any questions about forming your Delaware non-profit, feel free to call us at 800-223-3928 or contact us.