Starting a nonprofit in New Jersey is easy
Most nonprofits formed for religious, charitable, scientific, literary, or educational purposes, are eligible for federal and state tax exemptions under 501(c)(3) laws. To start a tax-exempt nonprofit organization, you must first start a nonprofit according to the rules of the state, and then apply for 501(c)(3) status with the IRS. To start your tax exempt 501(c)(3) nonprofit organization, follow these steps:
Step 1: Name Your New Jersey Nonprofit
Choosing a name for your organization is the first and most important step in starting your nonprofit corporation. Be sure to choose a name that complies with New Jersey naming requirements and is easily searchable by potential members and donors.
1. Follow the naming guidelines:
The name that you pick for your organization must include "a New Jersey Nonprofit Corporation", "incorporated”, "corporation”, or “corp”.
You can read the official guidelines for the complete rules on naming a New Jersey based organization.
2. Is the name available in New Jersey? Make sure the name you want isn't already taken by doing a name search on the State of New Jersey Website.
3. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
Step 2: Choose a Registered Agent in New Jersey
Your nonprofit is required to nominate a New Jersey registered agent for your organization.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? A registered agent must be a resident of New Jersey or a corporation, such as a registered agent service, authorized to transact business in New Jersey. You may elect an individual within the company including yourself.
Step 3: Select your Directors & Officers
The directors of an organization come together to form a board of directors. This board of directors is responsible for overseeing the operations of the nonprofit.
The president, secretary, and other members of nonprofit who have individual responsibilities and authorities are known as officers.
The organization structure of your nonprofit in New Jersey MUST include:
- At least 3 directors not related to each other
- A president
- A secretary
- A treasurer
NOTE: One person may hold two or more officer positions, however, if a document requires signatures of two officers, it must be signed by two different people.
Step 4: Adopt Bylaws & Conflict of Interest Policy
To be eligible to apply for 501(c)(3) status, your nonprofit is required to have the following two documents:
- Conflict of interest policy.
What are Bylaws? Bylaws are the rules outlining the operating procedures of the nonprofit.
What is a Conflict of Interest Policy? A Conflict of Interest Policy is the collection of rules put in place to ensure that any decisions made by the board of directors or the officers benefits the nonprofit and not individual members.
NOTE: The bylaws and conflict of interest policy must be adopted by the nonprofit during its first organizational meeting where the directors and officers are officially appointed.
Step 5: File the New Jersey Public Records Filing for New Business Entity
To register your nonprofit, you will need to file a Public Records Filing for New Business Entity with the Department of Treasury.
To ensure that your nonprofit is eligible to apply for 501(c)(3), when filing for a New Business Entity you must explicitly state the following:
In order to qualify for 501(c)(3) status, the organization’s purpose must explicitly be limited to one or more of the following:
Charitable, Religious, Scientific, Educational, Literary, Fostering national/international amateur sports competition, Preventing cruelty to animals/children, Testing for public safety
You must explicitly state what the assets of the organization will be used for, and what will happen to the assets if the organization is dissolved.
To be eligible for 501(c)(3) status, the assets of your organization must only ever be used for purposes approved under section 501(c)(3).
Section 5 of this sample IRS document provides an example of these provisions required for 501(c)(3) eligibility.
Step 6: Get a New Jersey State Tax Identification Number
Within 60 days of filing as a new business entity the organization must apply for a New Jersey Taxpayer Identification Number.
File the Tax Identification Form
Step 7: Get an EIN
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity such as your nonprofit corporation. It is essentially a social security number for your organization.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.
Step 8: Apply for 501(c)(3) Status
Before a nonprofit can apply for 501(c)(3) status it must,
- Elect at least 3 directors not related to each other
- File the Public Records Filing with the required provisions (As covered in Step 5)
- Adopt the bylaws and conflict of interest policy
- Have an EIN number
Once these four conditions have been met your nonprofit can apply for 501(c)(3) tax exempt status by filing Form-1023 online.
If your application is approved, the IRS will send you a determination letter stating that your organization is exempt from federal taxes under section 501(c)(3).
FAQ: Starting Your Nonprofit
When should an organization apply for federal tax exemption?
Form 1023 must be filed within 27 months from the end of the first month your organization was created.
How long will it take for the IRS to process Form 1023/1023-EZ?
Soon after sending your application you should receive an acknowledgment of receipt of your application.
If your application is simple and complete, IRS will send your determination letter within 180 days for Form 1023
If you have not heard from them by that time you can call (877) 829-5500 to inquire about your application.
Protect Your Business & Personal Assets
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
To open a bank account for your nonprofit corporation you will typically need the following:
- The EIN for the nonprofit
- A copy of the nonprofit’s bylaws
- A copy of the public records filing
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Business insurance helps you manage risks and focus on growing your business.
The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths.
Recommended: Inform your employees about their rights and stay compliant by posting labor law posters in your workplace.
Properly Sign Legal Documents
Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability.
When signing legal documents on behalf of your nonprofit, you could follow this formula to avoid problems:
- Formal name of your organization
- Your signature
- Your name
- Your position in the business as its authorized representative
See the image below for an example:
This ensures that you are signing on behalf of your nonprofit and not as yourself.
State of New Jersey Quick Links
- IRS - Information for Charities & Nonprofits
- IRS - Required Provisions for Organizing Documents
- IRS - 990 Series for Tax-Exempt Organizations
- IRS - Applying for Tax-Exempt Status
- IRS - 501(c)(3) Compliance Guide
- New Jersey Department of Treasury - Starting a Nonprofit
- New Jersey Department of Treasury - Forms