Most nonprofits are 501(c)(3) companies, which suggests they are formed for religious, charitable, scientific, literary, or instructional needs and are eligible for federal and point out tax exemptions. To develop a 501(c)(3) tax-exempt corporation, initial you need to have to kind an Illinois not-for-income corporation. Then you utilize for tax-exempt standing from the IRS. Listed here are the facts.
Variety Your Illinois Not-For-Earnings Corporation
one. Opt for who will be on the original board of directors
In Illinois, your nonprofit corporation must have three or much more directors. You have to have at the very least 1 incorporator and the incorporator can be an person (age 18 or older) or a corporation (domestic or overseas).
two. Opt for a name for your corporation
The name of your not-for-gain company will have to be distinguishable from the name of any business enterprise entity on file with the Illinois Secretary of Point out. To see if your proposed name is obtainable, you can look for Illinois's corporate identify databases on the Illinois Secretary of Condition's site. You can also write or get in touch with the Secretary of Stateʼs office in Springfield to find out if a identify is obtainable. You might reserve a title for up to ninety days by filing an Application for Reservation of Identify (Type NFP 104.ten). The submitting fee is $twenty five.
While not essential, the identify may perhaps incorporate the terms "corporation," "incorporated," "company," "limited," or an abbreviation of a person of individuals. The name ought to close with the letters "NFP" if the company identify incorporates any phrase or phrase that indicates or indicates that the company is arranged for any intent other than a goal authorized under the Illinois Typical Not For Financial gain Corporation Act. The identify may not contain the text "regular democrat," "regular democratic,""regular republican," "democrat," "democratic," "republican," or the title of any other recognized political get together, except consent is given by the Point out Central Committee of the recognized political occasion.
3. Appoint a registered agent
Each and every Illinois nonprofit corporation have to have an agent for service of procedure in the point out. This is an particular person or company that agrees to take legal papers on the company's behalf if it is sued. The agent ought to have a actual physical road handle in Illinois, not a write-up place of work box. Tiny nonprofit companies ordinarily name a director or officer to provide as the initial agent. The agent will have to consent to the appointment.
4. Get ready and file your not-for-profit articles of incorporation
To legally create your nonprofit company, you will have to create and file not-for-earnings posts of incorporation with the Illinois Secretary of Condition's place of work. The posts of incorporation have to involve:
- the company title
- the tackle of the company's original registered business in Illinois and the identify of the initial registered agent at that office environment
- the identify and tackle of every single first director
- your corporation's intent–this will have to comply with IRS needs (see down below)
- whether the corporation is a condominium association, cooperative housing corporation, or frequent-curiosity property owner's association, and
- the title and tackle of every single incorporator.
The Illinois Secretary of State has a fillable not-for-gain articles of incorporation (Sort NFP 102.10) on its internet site which you can use to form your not-for-financial gain Illinois company. You may possibly not file your articles on the internet.
The fillable articles kind on the Secretary of Condition's site has the minimum facts necessary to create a nonprofit in Illinois. straight from the source does not include things like language demanded by the IRS to get hold of 501(c)(three) federal tax-exempt position. To acquire 501(c)(three) tax-exempt position from the IRS, your company have to have particular precise language in its article content, such as:
- a assertion of purpose that fulfills IRS requirements
- statements that your nonprofit will not interact in things to do unrelated to its exempt purposes or in prohibited political or legislative activity, and
- a dissolution clause dedicating the company's belongings to a further 501(c)(3) business or to the authorities on dissolution.
You'll have to have to insert these clauses to your article content your self. You can increase the purpose clause in the blank place in Write-up 4. You can include the prohibited activities and dissolution clauses in Posting 5, which is for "other provisions." You can come across sample language to use authorised by the IRS in the Instructions for IRS Kind 1023-EZ, (see Part II).
For a lot more info on IRS needs for tax exemption, like sample language, seek the advice of How to Variety a Nonprofit Company, by Anthony Mancuso (Nolo). For a lot more details on preparing your Illinois not-for-income article content, see A Information for Arranging Not-for Financial gain Corporations (Type C 165) obtainable on the Illinois Secretary of State's web page.
five. Put together bylaws for your Illinois nonprofit corporation
You'll need to put together bylaws that comply with Illinois law and consist of the guidelines and methods your corporation will comply with for holding meetings, electing officers and administrators, and having treatment of other company formalities needed in Illinois. Your bylaws do not will need to be filed with the Illinois Secretary of Point out — they are your inside running handbook.
For extra info on bylaws, see Nolo's write-up Nonprofit Formation Paperwork: Posts of Incorporation, Bylaws, and Organizational Minutes. For enable making your bylaws, see Nolo's e book How to Type a Nonprofit Company, by Anthony Mancuso (Nolo).
six. Hold a conference of your board of administrators
Your very first board meeting is usually referred to as the organizational meeting of the board. The board should really get this kind of steps as:
- approving the bylaws
- appointing officers
- location an accounting time period and tax 12 months, and
- approving initial transactions of the corporation, these types of as the opening of a company lender account.
Just after the assembly is completed, minutes of the conference need to be established. Set up a corporate data binder to keep the corporation's articles or blog posts, bylaws, consent types, minutes, and other essential documents. For much more facts, as properly as minutes kinds, consent kinds, and other resolutions, see Nonprofit Conferences, Minutes & Data, by Anthony Mancuso (Nolo).
seven. Receive an EIN

Your nonprofit corporation need to obtain a federal employer identification number (EIN). You may possibly get an EIN by finishing an on-line application on the IRS internet site. There is no filing rate.
8. Receive your business licenses
Based on the kind of activities your nonprofit intends to carry on and exactly where it is situated, it may need to get a state business license. For regional licenses, check out with the clerk for the metropolis in which the nonprofit's key office environment is situated (or county if it is in an unincorporated place). For state licenses, test the Illinois Department of Commerce First Quit Organization Info Heart.
nine. File an yearly report
All nonprofit firms in Illinois must file an annual report with the Secretary of Point out. The report is owing each yr prior to the initial working day of the corporation's anniversary thirty day period (the month in which it was arranged). For example, if your corporation was developed on July 15 then your report would be thanks by July one. The report can be submitted online or by mail with Form 114.05. The submitting fee is $10.
Receive Your Federal and State Tax Exemptions
Now that you have designed your nonprofit corporation, you can attain your federal IRS and Illinois state tax exemptions. Here are the steps you have to get to obtain your tax-exempt standing.
10. File your Kind 1023 federal tax exemption software
To acquire federal tax-exempt standing from the IRS, you will will need to complete and file IRS Form 1023, Application for Recognition of Exemption Beneath Segment 501(c)(three) of the Inner Revenue Code. This extensive and comprehensive form asks for plenty of data about your firm, including its history, funds, organizational structure, governance insurance policies, operations, functions, and much more. For line-by-line guidance on how to entire the Sort 1023, see How to Form a Nonprofit Company, by Anthony Mancuso (Nolo).
Lesser nonprofits may well be eligible to file Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(three) of the Internal Revenue Code. This is a significantly less difficult, shorter sort that is filed online. Only more compact nonprofits–individuals with projected annual gross receipts of fewer than $fifty,000 and full assets of much less than $250,000–are qualified to use the streamlined 1023-EZ software.
See the IRS internet site for additional data on the Sort 1023 and Form 1023-EZ submitting prerequisites.
eleven. Illinois state tax exemption
As soon as your nonprofit receives 501(c)(3) tax-exempt standing from the IRS, you are mechanically exempt from Illinois profits tax. You do not have to have to file any paperwork to attain the exemption.
Some not-for-earnings companies may possibly qualify for an exemption from point out profits taxes. To uncover out if your nonprofit qualifies, publish a letter of ask for to the Illinois Section of Income, Product sales Tax Exemption Part, and enclose photocopies of your content articles of incorporation, bylaws, IRS exemption letter, or any other document that may perhaps enable in analyzing your position. Examine the Illinois Office of Earnings website for a lot more details.
12. Other state reporting and registration requirements
Relying on your actions and the measurement of your corporation, you may well need to sign-up with the Illinois Attorney Typical prior to doing any fundraising activities. Examine the Illinois Attorney Standard's web page for policies and information and facts about fundraising registration needs. For a lot more info about fundraising registration needs in all fifty states, see Nonprofit Fundraising Registration Digital Guideline, by Ronald J. Barrett and Stephen Fishman.
A.  Formation Meeting
The preliminary company meeting is the critical initial action in forming a nonprofit corporation.  It is at this meeting that the first board of directors is put in and officer titles determined.  The minutes (notes) of this assembly should contain a resolution that displays unanimous affirmation by the initial board to set up the business and pursue both incorporation and federal tax exemption.  The intent of the business must be articulated in writing, as perfectly.
B.  Federal Employer Identification Selection (FEIN)
Getting an FEIN is an essential early step.  An FEIN, or Federal Employer Identification Range, is a numeric identifier for companies.  Significantly like a Social Stability number, it is a 9-digit number assigned by the Interior Profits Assistance that becomes completely associated with your firm.  It is expected of all organizations, both equally for-profit and nonprofit, and its acquisition ought to be among the the first points attained by new startups.
Sort Identify:  Application for Employer Identification Selection
Variety Range:  SS-four
Submitting Payment:  $
Basis Group Company:  Of course (a ingredient of SureStart&trade)
C.  Incorporation in Illinois
Incorporating a nonprofit involves the submitting of a development doc, generally referred to as Posts of Incorporation, unless of course normally indicated down below.  In Illinois, this document is filed with the Secretary of State&rsquos workplace.
Variety Name:  Content articles of Incorporation
Sort Selection:  NFP 102.ten
Filing Cost:  $fifty
FOR Further Info:  https://www.cyberdriveillinois.com/publications
Basis Team Support:  Of course (a component of SureStart&trade)
Be aware:  Whilst the state of Illinois provides a template (boilerplate) doc for incorporation, be aware that the Illinois template does not meet Internal Income Provider requirements for acquiring 501(c)(3) standing.  As element of our SureStart nonprofit development company, all Articles of Incorporation well prepared by Foundation Group are drafted to satisfy stringent IRS needs.
D.  Bylaws
Bylaws are the policies used by the officers and administrators to govern the firm. Illinois does not call for a duplicate of the bylaws to be filed with the point out.  Regardless of submitting necessity, their development is a component of the development procedure and is demanded by condition regulation.  It is important that the bylaws be drafted by someone with information of each state and federal legislation governing the operation of a tax-exempt organization.
Observe:  A copy of the bylaws is needed by the IRS when searching for tax-exemption as a 501(c)(three) business, until applicant is employing Kind 1023-EZ.
Basis Team Assistance:  Indeed (a part of SureStart&trade)
E.  FEDERAL TAX EXEMPTION (501(c)(3) Position)
The moment a nonprofit company has been shaped, the future step is to seek out tax-exemption from the Inside Earnings Assistance, additional commonly referred to as receiving 501(c) position. The IRS acknowledges statuses from 501(c)(two) as a result of 501(c)(27). The  too much to handle majority of tax-exempt companies are acknowledged as 501(c)(3) organizations for their charitable uses.
To receive recognition as a 501(c)(3), tax-exempt entity, Form 1023 must be submitted with the Inside Revenue Services.  Form 1023 is a thorough search at an firm&rsquos construction and packages.  Provided the variety of further schedules, attachments, and exhibits that may be demanded in addition to the application itself, most Kind 1023 filings range among fifty-100 web pages of data.
In July of 2014, the IRS introduced Variety 1023-EZ.  This abbreviated variation of the software for exemption is an on the internet-only kind, accessible only to competent, smaller corporations.  Type 1023-EZ is controversial in that most states oppose its use and the foremost nonprofit sector and advocacy groups panic it will negatively influence grant funding alternatives for smaller charities that use it.
Type Identify:  Application for Recognition of Exemption Less than Area 501(c)(three) of the Internal Income Code
Variety Range:  1023 (or 1023-EZ)
Filing Price:  $600 ($275 for Sort 1023-EZ)
FOR More Info:  https://www.irs.gov/pub/irs-pdf/f1023.pdf
Foundation Group Services:  Of course (a ingredient of SureStart&trade)
Notice:  For organizations seeking federal tax-exemption under one more 501(c) area, Form 1024, Application for Recognition of Exemption Underneath Section 501(a), have to be submitted.
Should really the IRS grant tax-exempt status, the applicant will be issued a Letter of Perseverance to that outcome.
F.  Point out Income Tax-Exemption (Company Profits Tax)
Most states realize the federal Letter of Dedication and do not need any more point out filings in order to be cash flow tax exempt for state needs.  A handful of states, on the other hand, have their possess recognition demands.
ILLINOIS Necessitates Submitting:  No
Variety Identify:  N/A
Type Number:  N/A
Submitting Price:  N/A
FOR Further Information and facts:  https://www.cyberdriveillinois.com/publications
Foundation Team Service:  Sure, in unique service deals
Notice:  Corporate tax-exemption does NOT exempt you from Unrelated Company Earnings tax (UBIT).  For further info, see https://www.501c3.org/tag/unrelated-business-cash flow .
G.  Charitable Solicitations (Fundraising) Registration
Most states demand a nonprofit corporation to register with its Division of Charitable Solicitations, generally administered by the Lawyer Basic&rsquos office. Some states administer the effort and hard work through the Secretary of Condition, and others are a blend (bifurcated). A vital place is that nonprofits may possibly have a registration necessity outside of their state of incorporation if the corporation solicits donations in these other states.
In addition to initial registration, most states have to have charities to renew their registration on an yearly basis.  Failure to keep compliance with fundraising registration may perhaps end result in punitive fines and decline of skill to function in that point out.
Form Identify:  Charitable Group Registration Statement
Type Amount:  CO-one, if much less than a calendar year old
Filing Rate:  $fifteen
EXEMPTION FROM Filing Allowed:  Yes, various applications and property
Variety Title:  Religious Corporation Exemption
Type Range:  CO-3
AUDIT Prerequisites:  Gross revenues larger than $300,000 or contributions increased than $25,000 if a experienced fund-raiser engages in fundraising
FOR Further Details:  https://www.illinoisattorneygeneral.gov/charities
Basis Team Provider:  Certainly, both of those as a part of SureStart&trade and a-la-carte
H.  Product sales Tax Exemption
Several nonprofits can gain from remaining exempt from revenue tax on purchases of companies, items, and resources.  Some of the states that make it possible for for income tax exemption involve that you have previously been given your 501(c)(3) position from the IRS.  Others do not.
ILLINOIS Makes it possible for:  Yes, a variety of companies
Variety Name:  No type, but information and facts is requested.  See web-site.
Variety Quantity:  N/A
Filing Charge:  No rate
FOR Additional Details:  https://www2.illinois.gov/rev/research/publications
Basis Team Company:  No
I.  County of Other Area Registrations
There are three,140 counties in the US.  Whilst quite a few do not demand small business licenses or other filings by nonprofits, some do.  We hugely advise that all companies call their County Clerk&rsquos office to inquire as to any vital filings.  Several community, city, and county companies also call for a organization license registration.  Please examine with your regional organizations to make certain you have satisfied all specifications to run.
Basis Group Service:  No
Ongoing Nonprofit Compliance
At the time a nonprofit group has been established and has obtained tax-exemption and other required skills, these statuses have to be preserved.  Beneath is a record of the ongoing compliance submitting needs for a nonprofit, tax-exempt group in Illinois.
A.  Company Once-a-year Report
Your nonprofit corporation need to file a corporate report per year with the condition in get to continue being in good standing.  This report keeps the state updated about the business&rsquos present officers, directors, and other suitable facts.
Foundation Team Support:  No
B.  Federal IRS Sort 990
IRS Sort 990 is an once-a-year data return that will have to be submitted by all 501(c) companies.  Type 990 is equivalent to a corporate tax return, but with many important distinctions. It is an yearly report of income and expenditure exercise, alongside with info distinct to nonprofits: the prior yr&rsquos activities and achievements, significant detail about framework and functions and details about larger sized donors. No taxes are due on web revenue from tax-exempt pursuits.
There are five distinct versions of Kind 990: Variety 990, Type 990EZ, Sort 990-N, Kind 990PF, and Type 990-T. Which one particular is demanded of any unique business is dependent upon a quantity of things, the most considerable of which is the amount of annual, gross profits gained by the firm. In tax year 2008, the IRS significantly elevated the sum of info that is demanded to be described by businesses. 2009 included even much more to those people improvements. It is remarkably a good idea that nonprofit businesses seek the help of a qualified specialist to assist with the preparing of Variety 990.
Notice:  Some model of Form 990 is needed of all 501(c) businesses (other than church buildings), irrespective of gross earnings or earlier filing requirements . . . even if an firm has not nonetheless been given official 501(c) perseverance.  Important penalties, and even revocation of tax-exempt status, can result from failure to file a timely and precise return.
Type Title:  Return of Firm Exempt from Cash flow Tax
Type Number:  Kind 990, 990EZ, 990-N, 990PF, 990-T
Filing Payment:  $
Thanks Day:  15th working day of the fifth month pursuing the finish of the fiscal yr (extendable for 6 add&rsquol months)
LATE Filing PENALTIES: $20 for every working day, up to the lesser of $10,000, or five% of the firm&rsquos gross income.  If gross profits exceeds $1,046,five hundred, the penalty increases to $one hundred for each working day, up to $52,000.
FOR Extra Data:
https://www.irs.gov/types-pubs/about-variety-990
Basis Group Services:  Of course, both as a ingredient of Assurance&trade, and a-la-carte
Be aware:  There are no financial penalties involved with the late filing of Variety 990-N.  The IRS will, nevertheless, revoke the tax-exempt status for companies that are unsuccessful to file any edition of the Sort 990 for three consecutive yrs.  Other than 1 formal observe, the IRS will NOT send out once-a-year reminders that your Kind 990 is due.
C.  Condition Exempt Firm Data Reporting
Most states figure out the IRS Type 990 as satisfactory for point out tax exemption reporting.  Numerous states have to have no reporting at all, based on the type of business.
ILLINOIS Involves Submitting:  No
Copy OF IRS Sort 990 Suitable:  N/A
Type Identify:  N/A
Type Number:  N/A
Thanks Day:  N/A
Filing Payment:  N/A
FOR Added Facts:  https://www.cyberdriveillinois.com/publications
Basis Team Provider:  No
D.  Charitable Solicitations Renewal
Once an group has registered with the point out Division of Charities, it may well have to renew that registration yearly.  If needed, the threshold to report typically is dependent on the variety of business and the quantity of gross income.
ILLINOIS Necessitates RENEWAL:  Yes
Form Title:  ILLINOIS CHARITABLE Organization Yearly REPORT
Type Variety:  Sort AG990-IL
Because of Date:  Within 6 months soon after the close of the organization&rsquos fiscal 12 months stop
Filing Charge:  $fifteen.00 Annual Submitting Payment
LATE Filing PENALTIES:  $one hundred.00
FOR Supplemental Data:  https://www.illinoisattorneygeneral.gov/charities
Foundation Team Company:  Indeed, as a element of Assurance&trade, and a-la-carte
E.  Other Reporting Needs
The regulatory globe we inhabit is in a consistent state of modify. It is essential that all organizations remain knowledgeable and informed, which includes (and specially) nonprofit, tax-exempt businesses. Know what your condition and the federal governing administration demand and keep latest. It is a ton a lot easier, and a lot less pricey, to do issues correctly the initial time.
Vital Observe: Kind improvements occur periodically to put into practice new necessities. Sorts could be removed or revised, or new kinds may well be produced. Ahead of distributing types for filing, please be absolutely sure that you have the most latest variation of forms.
One-way links can alter often. If you have a difficulty with a url, copy and paste the website link in your navigation bar.
Businesses &ndash If the nonprofit corporation has or may have workers and/or speakers/friends/unbiased contractors, there could be extra registration and reporting prerequisites at the federal and state stage.  A popular mistake for organizations is compensating people today as impartial contractors when the marriage needs having to pay them as personnel. You can uncover details at both the federal and state stage to make clear this kind of relationships. Under you will locate beneficial IRS links.  For point out specifications, check out with the Office of Revenue. This is the most generally applied title for that office your state may discover it by a distinctive identify. At this section, you will obtain topical data about:  state unemployment insurance policies (SUTA), point out profits tax (SIT), new hire reporting requirements, and employees compensation.