Basics of Creating a Non-Profit Organization (NPO) in New York State

Basics of Creating a Non-Profit Organization (NPO) in New York State

Non-profits are governed by both state law and federal law.  Think of the NPO as a train and one track is the state’s corporate laws and the other track is the federal private foundation tax laws.  The NPO train must stay level on both tracks to be created and to maintain tax-exempt status.

Minimum of 3 Independent Directors

New York State requires NPOs to have at least 3 directors, to implement a Conflict of Interest Policy, and to register with the NYS Attorney General Charities’ Bureau for fundraising purposes.  With few exceptions, a new NPO must identify at least 3 directors who are independent of each other.

The independence requirement is not a state law, but instead based on federal IRS laws that demonstrate the NPO is not being managed by individuals who may have a conflict of interest by having loyalty to each other instead of to the best interest of the NPO.

Identify Charitable Purpose

The NPO must have a clearly identified charitable purpose.  This includes the charitable goal, the persons who are to benefit from the NPO’s charitable activities, and how the activities will be carried out.  This is generally only about 2 sentences in length.  If you are unsure how to prepare this, an attorney can assist in drafting a concise statement.

File a Certificate of Incorporation (COI) with NYS Department of State

A NPO is generally a corporation in New York State.  There are exceptions, such as charitable trusts or private foundations created in a testamentary instrument.  The COI will include the names and addresses of the 3 initial directors and the charitable purposes of the organization.  It will also identify the corporation as a not-for-profit corporation that is either charitable or non-charitable.  The COI is signed by the incorporator and filed with the Department of State.  Within a few days, the incorporator will receive a copy of the filed COI that reflects the official creation date of the organization.

Next Steps

The NPO will then prepare the Bylaws and Conflict of Interest Policy, hold its first Board meeting, and work with their attorney to prepare and file the IRS Federal Application for Tax Exempt Status – whether a Form 1023, Form 1023-EZ, Form 1024 or Form 1024-A.  The NPO will officially be a tax-exempt entity when it receives a Determination Letter from the IRS after filing the proper Federal Application. This article on our website will help you with understanding the Form 1023 => Understanding the Form 1023 – Jennifer V.Abelaj Law Firm.

If you need assistance with creating a non-profit organization, be sure to work with an attorney. The attorneys at Jennifer V. Abelaj Law Firm are experienced in representing founders in obtaining tax-exempt status.