Starting a nonprofit is a life-changing commitment, with a complex process. Luckily, there are guides and steps to make your organization successful, while still following the correct protocols. If you come across needing assistance with legal forms, Mitchell-Firm is happy to help. Contact us for help starting your nonprofit and continue reading to learn about how to start a nonprofit in Virginia.
Welcome to our comprehensive guide on how to start a nonprofit in Virginia. You’re setting a course to join the ranks of leaders contributing to the wellbeing of their communities. But where do you begin?
There are thousands of nonprofit organizations in Virginia, with focuses ranging from healthcare to education, arts, animal welfare, and beyond. But if you see an unmet need in your field and are ready to make a difference, we’re here to help you. By following these twelve steps, you’ll soon be able to build a team, apply for grants, and further your cause. This easy-to-follow guide will walk you through how to start a nonprofit organization in VA, also answer some of your initial questions.
Step #1. Name Your Organization
Choosing your organization’s name is an important first step in starting a nonprofit. It establishes your brand and should be unique, memorable, and engaging. Therefore, we recommend doing an online search of your name ideas before settling on your final choice. It’s also useful to see if your name is available as a website domain and social media handle.
You should also follow the guidelines and requirements set by the Commonwealth of Virginia:
- The name cannot imply that the organization conducts any other business than what it’s authorized to, or that it is a limited liability company or limited partnership.
- It cannot contain words or phrases prohibited by law, or the word “redevelopment” (unless it’s an urban redevelopment corporation).
- It cannot be the same as a pre-existing registered corporation or organization in Virginia. You can search for registered businesses on the State Corporation Commission Clerk’s Information System.
- There’s no need to include legal designations like “Inc.”, “LLC”, “LTD”, or “Company”.
You should also review the guidelines set forth by the IRS if your name includes characters or symbols.
Step #2. Name Incorporators and Directors
The incorporator is a short-term role and can be filled by anyone; there can also be more than one. It’s the incorporator’s job to sign and deliver articles of incorporation to the Commission for filing.
The directors make up your board of directors, who help govern the organization and provide experience, insight, and networks. Virginia only requires one director, but you need at least three unrelated individuals over the age of 18 to apply for tax-exempt status with the IRS. Directors serve a one-year term and may elect officials to fill one or more offices (president, secretary, treasurer, etc). But two or more offices may be held by the same individual. Each board committee must include at least two directors.
When selecting a board, you should look for a group of individuals with diverse experiences and varied professional backgrounds that can speak to your programs, fundraising needs, and status within the community. In other words, choosing people who bring different viewpoints to the discussion will help your nonprofit thrive.
Step #3. Appoint a Registered Agent
A registered agent is responsible for receiving legal documents on behalf of your organization and is required for nonprofits in Virginia. The appointed registered agent can be an individual or corporation (like a registered agent service), but they must be physically located in Virginia and maintain an office that is open during regular business hours. You can fill this role yourself, or elect someone within your organization. But the role cannot be filled by more than one person or entity.
Step #4. File Virginia Articles of Incorporation
Filing Virginia Articles of Incorporation legally marks the creation of your nonprofit. Nonprofits in Virginia are typically formed as “Virginia nonstock corporations” and must include whether or not the corporation will have members, and who will authorize the appointment or election of future directors. In addition to that, you will need to fill out Form SCC819 and must include:
- Your organization’s name
- The registered agent and office location
- Your initial directors
- Your incorporator(s)
Upon filing the articles of incorporation and paying the $75 fee, you will be given a Personal Identification Number (PIN). The turnaround time for mailed-in forms is about seven business days. However, for forms filed online, it’s about three to seven days. However, you can expedite the process for a fee: $100 for next-day service and $200 for same-day service.
Review the Virginia Nonprofit Organization Toolkit for additional tips and advice.
You will need to file with the IRS around the same time by filing a Form 1023 or 1023-EZ. It is to apply for tax-exempt status, outlined in Step #9. Moreover, you will need to use the same information and wording on all legal documents. In order for your articles of incorporation to be accepted when you apply for tax exemption, they’ll also need to include:
- Acceptable purposes
- Limitations on distributions and restrictions on activities
- Restrictions on the distribution of assets upon dissolution
Step #5. Publish Incorporation
While some states require you to publish notice of your intent to incorporate or incorporation, you do not need to do this in Virginia.
Step #6. Apply for an Employer Identification Number (EIN)
Your Employer Identification Number (EIN), sometimes called a Federal Tax Identification Number, is a unique nine-digit number assigned by the IRS. It will be useful while identifying your organization on tax documents, when you apply for tax-exempt status, and when you open a bank account. You can apply online, or by mail, phone, or fax by filling out Form SS-4, and this is a free service.
It is necessary to complete the application in one session, so prepare your documents and information in advance. You will receive your EIN immediately if you file online (print your EIN before ending the session). If not, then within four business days if by fax, and within four to five weeks if by mail.
Step #7. Hold Organization Meeting and Establish Nonprofit Bylaws
The next important step, and one required before you apply for federal tax exemption, is to hold your first board of directors meeting. This is not only an opportunity to bring your board together and elect directors and officers, it is also the moment to draft your bylaws and adopt a conflict-of-interest policy. Designate someone to draft an agenda and take minutes. Also, be sure to keep these documents organized along with your legal documents.
Your nonprofit bylaws are the main governing document for your organization. As a result, they are important for accountability and transparency. Also, they should be in compliance with Virginia’s state laws and should include your organization’s purpose, board regulations, and meeting requirements, and a dissolution clause, among other topics outlined in our article, Nonprofit Bylaws Made Easy. Draft your bylaws in advance so you can review and ratify them during your initial meeting.
The conflict-of-Interest policy is an outline of what to do if someone in a key role in your organization has a competing interest that might come before the nonprofit. Your board and leaders should act in the interest of the organization first. This policy will outline how to handle any potential issues.
Step #8. Apply for Virginia State Tax Identification Numbers/Accounts
In Virginia, after registering with the State Corporation Commission and getting your EIN, you also need to register your business with Virginia Tax. For that, you will need your:
- Business name and address
- Entity type
- NAICS code
- Tax types you’re registering for
Review Virginia Tax’s checklist for more information. If you register online, you’ll receive your account number for each tax type immediately. Plus, you get the documents to help you with returns and deadlines. You’ll also get a business online services account. Also, you can fill out Form R-1 and apply via mail or fax. There is no fee for this application.
If you’re already planning to hire employees, you can register with the Virginia Employment Commission (VEC) at the same time.
Step #9. 501(c) Federal Tax Exemption
Now you need to register with the IRS and file for 501(c) tax exemption. Not only will this save you money, but it can be necessary for grants and sponsorships.
There are a few potential forms to fill out, and it depends on the type of nonprofit and eligibility:
- If you expect to raise less than $50,000 in the next three years and answer no to all questions on the eligibility worksheet (pg 13), you can file Form 1023-EZ. You must file by mail, it costs $275, and will take around one month to hear back.
- If you don’t meet the eligibility requirements for Form 1023-EZ and are looking to file as a 501(c)(3), you can fill out Form 1023. You must file by mail, this form costs $600, and you can expect to hear back in three to six months.
- If you are filing for a different 501(c) organization, you can use Form 1024.
You can learn more about different statuses and filing requirements through the IRS.
Step #10. Apply for Virginia State Tax Exemption
Once you’ve received your IRS determination letter and are exempt from federal taxes, your organization is automatically exempt from Virginia corporation income tax.
You will still need to apply for exemption from retail sales and use tax exemption, if you are seeking those, by filling out Form NP-1. In addition to the complete form, you will also need to include:
- Your IRS determination letter
- Your mission statement or statement of purpose
- Proof of registration for Virginia Solicitation of Contributions Law
- Federal Form 990, 990EZ, 990PF, 990N e-Postcard, or substitute form
- Financial review prepared by an independent Certified Public Accountant if your AGR is more than $750,000
- Total Taxable Purchases Made in Virginia
- Authorized representative’s signature
Step #11. Register for Charitable Fundraising
If you plan to solicit charitable contributions for your organization in Virginia or have funds solicited on your behalf, you need to register with the Office of Charitable and Regulatory Programs in the Division of Consumer Protection, Virginia Department of Agriculture and Consumer Services. In addition, you will need to register annually using Form 102, which must be mailed and will have a turnaround time of about four to six months. As a first-time registrant, you will pay a $100 fee and if your organization has a financial history, you will also have to pay an annual fee. Also, you should include the following:
- Certificate of incorporation, if incorporated
- Articles of incorporation, if incorporated
- Organization bylaws
- IRS determination letter
If you are an exemption eligible organization, you can file a one-time exemption application with Form 100. Eligible organizations are outlined in the Code of Virginia. However, there is a $10 fee to file this form.
Once you can accept charitable contributions, Donorbox can help you streamline the process and build an effective strategy. Our donation forms are customizable, allowing you to choose amounts and descriptions, campaign colors, and more. They also embed seamlessly into your website or widget and accept a wide range of payment options. Check out our article, Get Started with Donorbox, for a step-by-step guide!
Step #12. Apply for Necessary Virginia State Business Licenses
You may also need additional federal and state business licenses to successfully and legally run your nonprofit. Review federal licenses and permits by business type and activity to see if any apply to your organization. Also, you can review Virginia’s licenses services to see if any are applicable for you.
How to Meet Ongoing Nonprofit Compliance Obligations in Virginia
Congratulations! You’re now on your way to growing an effective nonprofit in Virginia. Now, there are a few ongoing compliance obligations that you’ll want to keep up with in order to keep your nonprofit and tax-exempt status:
1. File Annual Corporate Report
Every Virginia corporation must file an annual report with the State Corporation Commission. Also, you must file it on or before the last day of the month in which you had incorporated or registered it to transact business in Virginia. You can file it online through CIS. There is no fee. You can learn more here. Follow our Step By Step Guide To Writing An Effective Nonprofit Annual Report.
2. File Federal IRS Form 990
As a tax-exempt organization, you must also file Form 990 by the fifteenth day of the fifth month after the end of your organization’s accounting period. Although, there is no fee to file. You can learn more here.
3. Renew Charitable Solicitation Registration
You will need to renew your charitable solicitation registration annually. For the same, you’ll pay $30-$325 dollars as an annual registration fee. It depends on your gross contributions. Basically, you file the same form you initially registered with, Form 102. Then, your renewal will be due four and a half months after the close of your fiscal year. If you allow your registration to lapse, you will owe an additional $100 late registration fee, but you can request a due date extension.
1. What Is The Overall Cost of Starting A Nonprofit In Virginia?
Starting a nonprofit in Virginia will cost between $360-$1,100. It depends on your eligibility and charitable contributions. Even though many forms are free, here is the cost breakdown of fees:
- Virginia Articles of Incorporation: $75
- 501(c) Federal Tax Exemption: $275 ( Form 1023-EZ) or $600 ( Form 1023)
- Virginia Charitable Solicitation Registration: $100 (Form 102), plus $30-$325 (depending on contributions) or $10 (Form 100 – Exemption Application)
2. How Much Time Will It Takes To Start My Nonprofit In Virginia?
Much of your timeline is up to you and your board. However, you can count on several critical forms taking days to months to arrive. Although filing online will speed things up, here are some expected turnaround times:
- Virginia Articles of Incorporation
- Mail: ~7 days
- Online: 3-7 days
- Expedited options: $100 next day, $200 same day
- Employer Identification Number
- Online: immediate
- Fax: 4 days
- Mail: 4-5 weeks
- 501(c) Federal Tax Exemption
- Form 1023-EZ: 1 month
- Form 1023: 3-6 months
- Register for Charitable Fundraising: 4-6 months
3. Is My Virginia Nonprofit Eligible For Tax Exemption?
To be eligible for tax exemption, your nonprofit purpose must be: educational, religious, charitable, scientific, literary, testing for public safety, fostering certain national or international amateur sports competitions, or preventing cruelty to children or animals. Moreover, this should be a corporation (including a limited liability company), an unincorporated association, or trust. It must also receive at least one-third of its income from public sources.
In addition, in your organizational papers, you must explicitly state that your organization will not participate in any political campaign on behalf of any candidate or make expenditures for political purposes. Also, your organization must not distribute assets or income to individuals (except as compensation for services); nor should you use it for personal gain or benefit.
4. What Is An Annual Report For A Virginia Nonprofit?
An annual report is used to verify that the information in the Clerk’s Office is up to date. Every Virginia corporation is required by law to file an annual report with the State Corporation Commission each year.