If you’re reading this, it probably means you’re ready to take the first steps towards creating a nonprofit that will benefit your community, fulfill your service dreams, and contribute to your field! Congratulations!
Naming, certifying, registering, and renewing a nonprofit in Alabama is a wonderful experience, but teasing through legal requirements can be tedious, confusing, and overwhelming. We want to make this process as easy and effective as possible for you. This incredibly comprehensive, 15-step guide will show you how to start a nonprofit in Alabama.
In this guide, we’ll walk you through every step of how to start a nonprofit in Alabama including how to obtain NY agency approval, prepare your Articles of Incorporation, and apply for 501(c) status. This will not only allow you to establish and grow your nonprofit but also recruit your initial board of directors and employees, accept donations, and claim your tax-exempt status. Let’s get it done!
15 Steps to Starting a Nonprofit in Alabama
- Name Your Organization
- Obtain a Name Reservation
- Incorporators, Directors, and Officers
- Appoint a Registered Agent
- File Articles of Incorporation
- File Initial Report
- Get Employer Identification Number (EIN)
- Establish Bylaws
- Hold Organizational Meeting of the Board of Directors
- Get Alabama State Tax Identification Numbers/Accounts
- Apply for 501(c)(3) Status
- Apply for State Tax Exemptions
- Register for Charitable Solicitation (Fundraising)
- Obtain Other Business Licenses and Permits
- Ensure Compliance with Ongoing Filing Requirements
1. Name Your Organization
Your nonprofit’s name is key for establishing your brand and important for incorporating your nonprofit with the state of Alabama.
As you brainstorm the most powerful and representative name possible for your nonprofit, be sure to confirm that your name of choice is not already in use for another organization. Alabama’s Business Entity Records search engine will allow you to search for your name and ensure that it’s not been claimed. The State of Alabama also requires that your nonprofit corporation can not conflict with any other organizations in the state.
What are some things to be thinking about while searching for the perfect name? Take a look:
- Does this name reflect my nonprofit’s mission and work?
- Will prospective donors, volunteers, and beneficiaries be able to infer what my mission is simply based on this name?
- Does this name include any words that are commonly misspelled?
- Are there already nonprofit names in use that are very close to this one, that could be mixed up with my name?
- Are my desired social media handles available?
- Does this name have an undesirable acronym? For example, you might avoid naming your dance company “Biltmore Ave Dance” since its acronym is BAD.
2. Obtain a Name Reservation
Once you’ve chosen an available name, the State of Alabama requires that you officially register your nonprofit’s name with the state.
- Submit your name of choice using Alabama’s Domestic Entity Name Reservation form to the Alabama Secretary of State’s website.
- File your form via mail or courier or online. We recommend filing online to save time. Faxing and email are not accepted forms of submission.
- Fees for submission include $10 (standard shipping time) and $25 (shipping within 3 business days) for mail. Submission online costs $28, but this is for a quick, 24-hour processing time.
- Once your name has been reserved, Alabama will issue a Name Reservation Certificate that your organization will submit when you submit your required Certificate of Formation.
- If your name includes a professional designation (e.g. mathematics), you’ll need to provide evidence of licensing in that field.
3. Incorporators, Directors, and Officers
Recruiting and building your inaugural team is a critical next step that can have lasting impacts on your nonprofit.
Your nonprofit’s Incorporator will sign the Articles of Incorporation for your nonprofit. You will need at least one incorporator but can have more than one.
Board of Directors
Not only will your Board of Directors provide financial oversight for, govern, fundraise, represent, and make important decisions for your nonprofit, but it will also be responsible for writing and signing into effect your organization’s bylaws.
Nonprofit best practice recommends you recruit a very diverse board of directors that effectively represents the community you are planning to serve. Consider recruiting individuals across all age groups, of all races, classes, religions, and sexual orientations. Your efforts will establish a strong sense of trust and responsibility. Your community, funders, volunteers, and beneficiaries will also notice and appreciate your commitment to representing them through your work.
The State of Alabama requires that your organization recruits at least 3 un-related directors in order to meet IRS requirements. There are no requirements that your directors reside in a certain geographical area or secure some specific type of professional membership. At least two directors (i.e., the quorum) must be present at a meeting in order to ensure that the proceedings of that meeting are valid.
The State of Alabama requires that your nonprofit hire a president, one or more vice presidents, a secretary, a treasurer, and other officers or assistant officers as deemed necessary to successfully operate your organization. These officers will serve for at least 1 year and a maximum of 3 years. Two or more positions may be held by one individual, except for the roles of president and secretary.
4. Appoint a Registered Agent
Your nonprofit’s registered agent must be physically located in Alabama and maintain an office that operates during normal business hours. The registered agent is responsible for receiving legal notices for your organization. The Alabama Secretary of State website also includes an updated list of registered agents in Alabama.
5. File Articles of Incorporation
Congratulations! Your nonprofit’s Articles of Incorporation is the first legal document you’ll need to file to officially create your organization. This document contains basic information about your nonprofit, including but not limited to your name and location.
The following are specific steps to filing your Articles of Incorporation according to the Alabama Secretary of State – Business Services Division:
- File the form Domestic Nonprofit Corporation Certificate of Formation via mail.
- Mail one original form and two signed copies of this form to the Office of Judge of Probate in the county where your nonprofit’s registered office is located.
- Include your Name of Reservation Certificate along with your Certificate of Formation.
- The mailing will cost $100 for the state of Alabama and a minimum of $50 for your county.
- Mailing turnaround is 3-5 business days.
6. File Initial Report
This step will be beneficial to your nonprofit but is not required in Alabama. Filing an initial report – or publishing the news of your nonprofit in a local media outlet – can get the word out about your new organization’s purpose, services, and needs for funding. The Alabama Press Association provides a comprehensive list of newspaper publications throughout the state.
7. Get Employer Identification Number (EIN)
Your EIN will allow you to open a bank account, apply for 501(c)(3) status, and submit 990 tax returns to the IRS. Your EIN is a unique, nine-digit number assigned by the IRS to legally identify your nonprofit.
- Fill out IRS Form SS-4.
- It costs 0$ to mail, phone, fax, or submit your form online. The IRS website is only available during certain hours, so make sure to print your EIN before closing out your online session.
- Submission turnaround times are immediate when submitting online or via phone. Otherwise, turnaround times are 4 business days for faxing and 4-5 weeks for the mail.
8. Establish Bylaws
Your nonprofit bylaws describe how your organization will be run. They should encourage transparency and accountability to your community. Include an outline of your organization’s mission, meeting and officer requirements, and key stakeholder regulations. Be sure to include the following in your bylaws:
- Your nonprofit’s name
- Your nonprofit’s mission
- Geographic area served by your nonprofit
- Membership requirements (Responsibilities, Dues, Quorum, Voting Process)
- Board of directors (Duties, Officers, Meetings)
- Rules of order
- The fiscal year of operation
- Processes for amending bylaws
9. Hold Organizational Meeting of the Board of Directors
Your inaugural meeting for your Board is the time to approve your nonprofit bylaws and conflict of interest policy, appoint officers, and open a bank account. In Alabama, you must also provide a minimum of 3 days’ notice for the initial meeting to directors. Drafting and dispersing an agenda prior to the meeting and taking diligent notes will also make your meeting efficient and productive.
10. Get Alabama State Tax Identification Numbers/Accounts
The laws your nonprofit must follow vary by state, so make sure you understand the tax and licensing requirements that exist for your organization.
- Submit Form COM-101: Alabama Department of Revenue Combined Registration/Application to the Alabama Department of Revenue.
- $0 fee to mail your form or submit online, and turnaround time is 3-5 business days.
Alabama also offers a consolidated state tax registration application.
11. Apply for 501(c)(3) Status
This may feel like an extremely daunting task, but it comes with immeasurable and lifelong tax benefits. With this exemption, you’ll be exempt from IRS income tax, can apply for grants, and will grow your fundraising success. Consider hiring a professional to assist you in filing this form – doing so can be a lengthy process and you’ll want to make sure you get it right.
- Apply to the IRS with IRS Form 1023, IRS Form 1023-EZ, or IRS Form 1024.
- Follow instructions for filing these forms: Form 1023, Form 1023-EZ, or Form 1024.
- Filing by mail is required and costs $275 for nonprofits filing Form 1023-EZ and $600 for organizations filing Form 1023.
- Turnaround times are less than one month for form 1023-EZ and 3-6 months for form 1023.
12. Apply for State Tax Exemption(s)
Many states issue their own tax-exempt certificate that can be used for sales and use tax purposes. Once you’ve received your Determination Letter from the IRS, Alabama does not require your nonprofit to file to obtain an exemption from state income tax.
13. Register for Charitable Solicitation (Fundraising)
Registering in Alabama is required, but you may also consider registering in other states dependent on your nonprofit’s scope of work. In Alabama, you must register for solicitation with the Alabama Attorney General – Consumer Interest Division. Alabama requires solicitation registration to be renewed annually.
Initial requirements for solicitation registration are the following:
- Register with the Alabama Attorney General – Consumer Protection.
- Gather your articles of incorporation, Bylaws, IRS determination letter, list of officers, directors, trustees, and personnel, and list of states where charity should be registered or exempt.
- Fill out the URS or Alabama Charitable Organization Registration Form.
- File the form for $25; checks payable to Alabama Attorney General’s Office.
- Mail documents to the Officer of Attorney General, Consumer Protection by express delivery: 501 Washington Ave. Montgomery, Alabama 36104 or by mail: P.O. Box 300152 Montgomery, Alabama 36130.
14. Obtain Other Business Licenses and Permits
Alabama nonprofits do not need to obtain a state-level business license or permit. However, your nonprofit should check with your city and county clerk’s office to determine whether there are any local requirements you must follow.
15. Ensure Compliance with Ongoing Filing Requirements
Congratulations! You’ve officially turned your dream of starting a nonprofit into a reality! Though you’ve wrapped up the most critical first steps, it is key that you maintain your nonprofit’s compliance with ongoing requirements throughout the years. Alabama requires you to file the following on an annual basis:
- File IRS Form 990. This must be completed by the 15th day of the 5th month following the end of the taxable year. For the majority of organizations, the tax year ends on December 31st, making the form due May 15.
- File Alabama Sales Tax Exemption Renewals with the Alabama Department of Revenue.
- Renew your charitable solicitation registration (see steps for initially registering for charitable solicitation).
- Maintain an Alabama Registered Agent. This agent must have a stress address in Alabama and is responsible for handling and receiving legal documents.
Over to You
That you’ve decided to start a nonprofit in Alabama to support lives in need itself makes a lot of difference. The process may seem a little overwhelming at the beginning but there are enough resources available on the IRS and Alabama state government sites. Plus, you can always come back to refer to this thorough guide to have a check on the steps and find the important links.
Every good change starts with a little effort on the changemaker’s side but with it, imagine the thousands of lives you can change! We wish you the best in this endeavor of starting a nonprofit in Alabama.
If you wish to learn more about nonprofit management, tips, and resources, do feel free to check out our blog.