From the vibrant hubs of Little Rock to tranquil hot springs, Arkansas boasts a rich tapestry of nonprofit organizations. Individuals driven to affect positive change in the state can make a difference by forming a nonprofit. In this article, we’ve outlined a step-by-step process to help you navigate the legal requirements and the tools you need to get started.
There are 16,894 nonprofit organizations in Arkansas. Most are located in bigger towns like Little Rock and Fayetteville. Still, others are sprinkled across the state to provide health care, access to hot springs, summer camps, social and country clubs, and services for individuals with developmental disabilities.
Nonprofits are a significant employer in the state, and with assets of $50 billion, they are a serious economic player. Individuals who want to make a difference in Arkansas can start a nonprofit and join these influential organizations. This article provides a step-by-step action plan to start a nonprofit in Arkansas.
A nonprofit corporation is created for the public benefit, mutual benefit of its members, or for religious purposes. Arkansas Secretary of State’s website clearly explains this and makes it easier than most states to start a nonprofit ready to claim tax-exempt status with the Internal Revenue Service (IRS).
If you’re ready to get started, we’ve mapped out a clear plan to guide you through the process.
One of the most important things you can do when starting a nonprofit is to come up with an impactful name that accurately reflects your mission and inspires others to offer support.
Make sure the name you choose is available by searching the Secretary of State’s website here. If the name you’ve selected is available, you can reserve the name for 120 days by filling out the Secretary of State’s Application for Reservation of Corporate Name and paying $25.
The individual that applies for the nonprofit’s name is the owner. If the nonprofit changes hands, the original applicant can transfer the registration to another person with a signed notice of the transfer stating the new owner’s name and address.
Resource: Need help coming up with your new nonprofit’s name? Use our free Naming & Branding Worksheet to get started.
Nonprofits must include their purpose on Arkansas’s Articles of Incorporation and IRS tax-exemption applications. A nonprofit’s purpose is the same as its mission and should explain why the organization exists, who it serves, and how it serves them.
An organization’s purpose must be the same on all federal and state applications. Creating a compelling mission statement before filing any legal paperwork can help with this requirement and prepare the organization for marketing and fundraising activities.
Pro tip: A mission statement is the best way to inspire donors to learn more about the nonprofit and financially support its attempts to fulfill it. Use this guide to help you formulate your own.
A business plan can help organizations share their purpose, operational, and financial goals with board members, potential donors, and the public. Creating a business plan before anything else can also make starting a nonprofit easier.
Nonprofits must produce a unique business plan for each potential funder with the following sections –
An executive summary will be the last thing potential funders see in the nonprofit’s business plan, but it should be the first thing you create. Executive summaries should include the organization’s mission and purpose, a market analysis that describes the organization’s primary donor, what need the nonprofit is being formed to meet, and how it will satisfy this need.
After explaining the needs of the organization and how it plans to meet them, providing details on the nonprofit’s programs and services should be simple. A business plan must include descriptions, pictures, project plans, and other information explaining how these programs will help fulfill its mission.
Market research and analysis help nonprofits better understand their primary donor base and beneficiaries. Nonprofits must perform market research and create a marketing strategy to share with potential donors how they will fund their programs and services.
A nonprofit’s operational plan should include details on the organization’s location, legalities, governing structure, and organizational structure.
An impact plan will delve deeper into how the nonprofit will meet its mission.
New nonprofits don’t have financial statements and reports for startup funding. Instead, organizations can list potential revenue streams and details on how they expect to acquire them. A financial plan is also where a nonprofit can explain how each funder can play a role in meeting the organization’s goals.
In the appendix, nonprofits can list their board members and primary staff and provide resumes, promotional material, and the organization’s strategic plan.
An incorporator signs the nonprofit’s Articles of Incorporation and is responsible for understanding what the IRS requires for 501(c)(3) status. Incorporators can be one or more individuals.
Arkansas requires nonprofits to have a minimum of three directors. These individuals do not have to live in Arkansas or be organization members. The directors’ terms must be at least one year long but no longer than six years. Arkansas also requires nonprofits to have a president, secretary, and treasurer elected for up to three years by their board. Officers can hold one or more of these positions.
A registered agent will receive all legal documents for the nonprofit. They can be individuals or companies, must be in the state, and open during regular business hours.
Nonprofits can file Articles of Incorporation with the Arkansas Secretary of State online for $45 or by mail for $50. Arkansas does something other states don’t by providing sample provisions for organizations that plan to register as 501(c)(3) organizations with the IRS. What stands out in Arkansas’ Articles of Incorporation is the addition of –
Organizations can either choose the content given by the state or add their own wording for each provision.
In addition to these items, nonprofits will need to enter the following information on their Articles of Incorporation –
Nonprofits must apply for an Employer Identification Number (EIN) with the IRS before filing for tax-exempt status. Nonprofits can visit the IRS website to fill out this form online.
The earlier a nonprofit can get its board members involved, the better. Arkansas and the IRS require nonprofits to have at least three board members, but many organizations will need more to fulfill expectations for board members.
The organization’s first board meeting is crucial, as this is when the nonprofit’s officers are elected, and the bylaws are approved. During the first board meeting, nonprofits can assign board members to committees to ensure that fundraising activities and operations are handled immediately.
A nonprofit’s bylaws provide a roadmap that guides leadership on how to run the organization. The IRS requires nonprofits to have approved bylaws before filing for tax exemption. Nonprofit bylaws must include the following –
Arkansas’s Secretary of State website mentions nonprofits may reasonably compensate and reimburse members, officers, and trustees for services rendered and expenses incurred. The IRS states that reasonable compensation is allowed based on the services rendered and will be determined based on each circumstance.
The IRS assigns 501(c)(3) organization status and federal tax exemption for organizations with the following purposes:
Pro tip: Other nonprofits must apply with the IRS but may not receive the full tax exemption. Check out our complete list of nonprofit types to better understand where your nonprofit fits.
501(c)(3) organizations that expect to raise under $50,000 for the first three years can use Form 1023-EZ and pay $275. Before filing this form, nonprofits must fill out the eligibility worksheet. All other organizations must file Form 1023 for $600. After filing these forms, it may take one to six months to receive a letter of determination from the IRS.
After nonprofits receive a deferment letter from the IRS, they can apply for corporate income tax exemption and sales tax exemption with the Arkansas Department of Finance and Administration.
Nonprofits must give a detailed narrative of the organization’s activities with the purpose, date of activation, and leader of the activity. Nonprofits must also list their sources of financial support and fundraising activities, and include a copy of their latest financial statements.
Arkansas’ sales tax exemption application is a multi-state form that nonprofits can send to suppliers.
Before soliciting donations in Arkansas, nonprofits must register as a charitable entity (C-01) with the Secretary of State’s office. Nonprofits must send the following documents with this form to .
Nonprofits in Arkansas must file an Annual Financial Reporting Form with the Secretary of State’s office no later than 180 days after the organization’s fiscal year-end date. Organizations can file online at no charge. Nonprofits will need a filing number to complete this report.
There is more to starting a nonprofit than a bureaucratic process and legal requirements; it’s a testament to one’s commitment to serve others and make a tangible contribution to the community. As the state continues to grow, the role of nonprofit organizations becomes increasingly pivotal. From crafting compelling mission statements to navigating the intricacies of the legal framework, each step of this process can make a positive impact.
Donorbox provides comprehensive and detailed resources to help build healthy nonprofit organizations. As you develop your organization, we’re here to help as you train and onboard your new board, file tax returns, and create annual reports. Plus, use this Start-a-Nonprofit Checklist to keep track of your progress!
Ready to start fundraising? Visit our website to see what Donorbox offers through our innovative suite of fundraising tools. Sign up for updated articles on nonprofit fundraising, management, and more.
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.
Subscribe to our e-newsletter to receive the latest blogs, news, and more in your inbox.
Kristine Ensor