5 Best States to Incorporate a Nonprofit Organization

5 Best States to Incorporate a Nonprofit Organization

best states to incorporate a nonprofit organization

Nonprofits may be created to support individuals and families, save animals and the planet, or just offer a sense of community. Starting a nonprofit may even qualify you for superhero status, but the costs and requirements to start a nonprofit could be more than you expect. Luckily, there are states in the United States that welcome nonprofits.

We have listed the best states to start a nonprofit. All 5 states on this list have fewer nonprofit regulations and offer fewer fees to start a nonprofit.

  1. Delaware
  2. Arizona
  3. Nevada
  4. Wisconsin
  5. Texas

1. Delaware

best states to start a nonprofit

Delaware is a small state but remains the most popular state to start a nonprofit. Many nonprofits register as corporations, and unlike other states on the East Coast, nonprofits in Delaware can be formed under the same statutes as other for-profit corporations. Governance and annual reporting requirements in the state are also more flexible and straightforward than in other states. Another perk involves the state’s leadership requirements. To start a nonprofit in the state of Delaware, an organization is only required to have one director.

There are currently over 6,900 nonprofit organizations in Delaware. These organizations employ almost 12% of the state’s workers and generate almost $6 billion.

The cost of starting a nonprofit is also on the lower side. Nonprofits must file a Certificate of Incorporation for Exempt Corporations with a cost of $89. There is an additional $9 fee for additional pages, and if your organization needs it faster than three weeks, nonprofits can pay an expedite fee ranging from $50 to $1,000. Nonprofits that file for tax-exempt status with the Internal Revenue Service (IRS) must also pay either $275 or $600 depending on the size of the organization.

Finally, Delaware nonprofits that are tax-exempt with the IRS are not required to pay taxes in the state of Delaware. Nonprofits will still need to register with the Division of Revenue and withhold taxes for all employees and register with the Department of Labor.


2. Arizona

best states to start a nonprofit

Arizona has 19,796 nonprofits. These nonprofits employ 8% of the state’s workforce and generate $28 billion annually. With fewer regulations and reasonable fees, this state is one of the favorites for nonprofits willing to make a difference.

Nonprofits in the state must file their Articles of Incorporation for $25 and an additional $35 to expedite. Nonprofits must also pay to publish their articles once the state approves. The cost for this will generally cost $200, but other than a $12 license or location fee no other state fees are required. All nonprofits hoping to become tax-exempt must still file with the IRS. This costs $275 for Form 1023-EZ and $600 for Form 1023. Similar to Delaware, Arizona has fewer governing restrictions for nonprofits.


3. Nevada

best states to start a nonprofit organization

Nevada is known as a tax haven because there is no state tax income. This is a benefit for all corporations in the state. Nevada currently has over 7,000 nonprofit organizations. These organizations employ only 2.6% of the state’s workers but generate over $5 billion every year. There are no strict regulations in the state for nonprofits.

Nevada nonprofits must also file their Articles of Incorporation for $50 with the state. The state generally takes one week to finalize this process, but nonprofits can pay an additional expedite fee of $125 to $1000. Nonprofits get a business license with the state for $200 and file an initial report for $50. Once again, nonprofits must register with the IRS for tax-exempt status by filing Form 1023.


4. Wisconsin

best states to start a nonprofit organization

Wisconsin has complex reporting requirements, but the fees and relaxed regulations are enough to get it on the list. There are 30,854 nonprofits in Wisconsin. Nonprofit employees make up 12% of the state’s workforce and the industry generates more than $49 billion in annual revenue. Starting a nonprofit in Winsconsin is pretty easy and straightforward.

Other than paying the IRS $275 or $600 for tax-exempt status, nonprofits in Wisconsin fees are the lowest on this list. Wisconsin nonprofits must file an Articles of Incorporation for $35 along with a business tax registration fee of $20.


5. Texas

best state to incorporate non profit

Thanks to the size of Texas, nonprofits bring in a large annual revenue than others on this list. Nonprofits in Texas bring in over $113.9 billion in annual revenues. There are 92,734 nonprofits in the state, but only 5.1% of the state’s workforce is employed by nonprofits.

Texas is considered the best state to start a business; this fact also draws many nonprofits to it. The regulations are somewhat stricter than others on this list. Annual filings must be completed within given deadlines and 3 directors are required for nonprofits’ boards. However, these are often no match for the ample benefits and low fees that nonprofits get here.

Nonprofits in Texas can file their Articles of Incorporation for $25 if they’re willing to wait up to 40 business days. Those that can’t wait can pay a $25 expedite fee. Once a nonprofit has filed for tax-exempt status with the IRS, it must register to solicit funds with the state. The cost to register depends on the type of organization, with veteran organizations paying a fee of $150 and other public safety organizations paying $250.


Final Thoughts

best states to incorporate a nonprofit organization

Starting a nonprofit can be time-consuming, but the end result is an organization that can change the world. We have created a guide to help you register your 501c3 nonprofit organization and answer additional questions you may have. We also have state-specific blogs on starting a nonprofit; you should definitely give them a read for useful insights.

For more tips and resources on fundraising and nonprofit management, check out our nonprofit blog.

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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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