Instead of feeling overwhelmed and confused when starting a nonprofit, we’re here to walk you through the process one step at a time. Vermont nonprofits play a critical role in the state’s economy. If you’re ready to join other leaders in your community, we have an easy step-by-step guide for you to follow. Learn how to register with the state and federal government, choose your organization’s name and mission, write a business plan, and more.
Instead of feeling overwhelmed and confused when starting a nonprofit, we’re here to walk you through the process one step at a time. Vermont nonprofits play a critical role in the state’s economy. If you’re ready to join other leaders in your community, we have an easy step-by-step guide to starting a nonprofit in Vermont for you to follow. Learn how to register with the state and federal government, choose your organization’s name and mission, write a business plan, and more.
There are 6,497 nonprofits in Vermont. With 643,077 individuals in the state, that’s almost a nonprofit for every 99 people. Clearly, nonprofits are critical to the state. If you’re starting a nonprofit in Vermont, you’re ready to take a leadership role, and we’re here to help you get started. In this article, we’ve provided a step-by-step guide to help you register with the state and federal government and build a solid foundation to help you grow for years to come.
Starting a nonprofit is more than filling out applications; we’ve included tips and resources to help you choose a name, develop your mission, write a business plan, and form a powerful board.
What’s in a name? Well, if you’re a nonprofit, it can be a lot! Vermont corporation names must contain the following words:
Nonprofit names also cannot have the word “cooperative” or any similar abbreviation and cannot imply a different purpose other than who you are. Other than that, your nonprofit’s name is up to you.
Finding a name that shares your organization’s mission, speaks to your target market, and follows your state’s rules can take time and effort. If you’re having trouble finding a name, we’ve created a naming checklist to help. Once you’ve chosen one or two, visit the secretary of state’s website to see if it’s available.
After the name, the next essential item is your nonprofit’s mission. The Internal Revenue Service (IRS) requires 501(c)(3) nonprofit organizations to benefit the public with one of the following purposes:
Since your nonprofit’s purpose statement must be the same on all state and federal applications, choosing a mission statement will make the process easier. A mission statement should include who you’ll help, why, and how. Your mission statement also influences your organization’s marketing and culture. See our article on how to create your organization’s mission statement here.
While you’re filing the necessary paperwork to start a nonprofit, building a solid foundation and future fundraising is essential. A nonprofit business plan is one of the best ways to do this. A business plan helps you to:
Although some may consider business plans unnecessary and old-fashioned, this tool will make filing necessary state and federal paperwork easier and help you find critical startup funds.
The first section of your nonprofit business plan will lay out the organization’s programs and services. How will you fulfill your mission? What makes you different from other organizations with the same purpose? Answering these questions will have a significant impact on funders. Remember, people’s attention spans are limited, so it’s best to include images and infographics when explaining complicated ideas.
Your programs and services are critical, but you must also know your target market. Your marketing plan is where you should provide details on two types of markets: donors and beneficiaries. You’ll need information on their demographics, interests, and giving ability. Your marketing plan should include communication plans for potential donors, foundations, partners, etc.
The following section will help you create your organization’s bylaws, which are required when applying for tax exemption with the IRS. Your operational plan should include day-to-day activities, necessary legal requirements, and any insurance you may need. An organizational chart will help you provide details on the roles and responsibilities of your nonprofit board and staff.
The effect your nonprofit has on your community is its greatest appeal to funders. In the beginning, your organization’s impact is entirely in your mind. It’s vital to spend time on this section of your business plan and elaborate on how your organization can reach its goals.
Typically, business plan financials will include bank statements and reports. Since you don’t have any, you’ll need to research your competitors. Visit GuideStar and research similar nonprofits’ tax documents for examples of revenues and expenses. This information will give you a solid foundation for your organization’s budgets.
An Executive Summary is the first thing the funders read, but it should be the last thing you write. This section gives an overview of your business plan and describes your organization’s mission plan, target market, and how you’ll meet the needs of your community.
This section provides a space for additional documentation you may need, including:
Choosing a solid team in the beginning will limit the chance of burnout. Your organization’s Board of Directors and Incorporator are essential to that team.
An Incorporator’s primary purpose is to sign the articles of incorporation. The Incorporator can be one or more individuals, but it’s often the nonprofit founder. Choosing your board of directors is much more critical.
Starting a nonprofit in Vermont requires a minimum of three directors. The IRS also requires three directors but recommends more than three to ensure effective operations and fundraising. The state does not have a residency or membership requirement, but board member terms must be one to six years, and all board committees include a minimum of two directors. Vermont nonprofit boards must also have a president, secretary, and treasurer; the same individual can hold two or more offices.
Pro Tip: These regulations are meant to help you get started, but there is much more to building an effective board of directors. We’ve written several articles to help you build a board and recruit more members.
All nonprofits must have a Registered Agent to receive all legal documents for the organization. This can be done by an individual or a company, but the company must be in Vermont and hold regular business hours. Several companies offer this service.
Vermont nonprofits can file their articles of incorporation online, by mail, or in person. There is a $125 fee, and turnaround is five to seven business days.
After filing your articles of incorporation, you must file for an employer identification number with the IRS. You can file Form SS-4 immediately online or by mail. Corporations will receive a certificate of acknowledgment from the secretary of state’s office.
Before filing for tax exemption with the IRS, you must hold your nonprofit’s first board meeting. This board meeting is an opportunity to elect your officers, assign board members to committees, and start onboarding and training. It’s also time to finalize and adopt the organization’s bylaws and conflict of interest policy and approve opening a bank account.
Bylaws
Your nonprofit bylaws are a roadmap for your board of directors. Nonprofit bylaws must include the following:
Conflict of Interest Policy
The IRS does not allow any board or staff member to benefit financially from an exempt nonprofit’s earnings. Your organization’s conflict of interest policy will provide rules to follow when individuals in leadership have conflicting priorities.
Nonprofits that benefit the public can apply with the IRS as 501(c)(3) organizations and file either Form 1023-EZ or Form 1023. Organizations that earn under $50,000 for the first three years can file Form 1023-EZ for $275. There is an eligibility worksheet to determine if your organization qualifies. All other 501(c)(3) nonprofits must file Form 1023 and pay $600. It can take up to six months to receive your determination letter from the IRS.
Nonprofits that primarily benefit their members may also qualify for some benefits from the IRS. These organizations must use Form 1024 and pay $600 to become 501(c)(4) organizations with the IRS.
501(c)(3) nonprofits are automatically exempt from Vermont minimum corporate tax and sales taxes. You may have to file returns with the state if you have earned income classified as Unrelated Business Income.
Vermont nonprofits may also have to pay property taxes unless they fall under the following exemptions:
Vermont nonprofits are not required to register before soliciting donations.
When starting a nonprofit in Vermont, take note that you must file biennial reports every two years, beginning the first year following your organization’s initial registration. Organizations can file online between January 1 and April 1. First-time filers must create a user account. When you return to file the following years, you can use your User ID and password.
Transparency is critical when building trust and raising funds for your nonprofit. While the state of Vermont only requires nonprofits to file every other year, it’s best to create and share an annual report with donors and the public. Nonprofits can use their annual reports as an essential fundraising tool. Check out Donorbox’s guide to a nonprofit annual report to see how to use this tool to raise more funds for your new nonprofit.
Vermont nonprofits can hold raffles, bingo, card games, and “break-open” tickets to raise funds. Prizes are generally limited to $400 per game, but prizes worth $1,000, $5,000, and even $50,000 can be offered daily, monthly, and yearly in many cases.
You do not need a license to host a raffle in Vermont, but if your nonprofit chooses to host a “break-open” ticket sale, you must have a license to sell alcoholic beverages. Remember to contact your local municipality to ensure you follow all local laws and regulations.
Starting a nonprofit in Vermont means you will significantly impact the state’s residents and economy. As you register with the state and IRS, spend time building a solid foundation for your organization. Choosing an effective and passionate board and creating a business plan will help you limit future burnout and increase your chances of success.
As online fundraising becomes the norm, Donorbox has become an affordable fundraising tool for thousands of nonprofits worldwide. Visit our website to see what we offer and why thousands of other nonprofits are choosing Donorbox to help them change the world!
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor