In this comprehensive guide, we break down the process of starting a nonprofit in Delaware into manageable steps. From choosing a name and mission to filing for tax exemption, this guide will help you navigate the process with confidence and set your nonprofit on the path to making a meaningful impact.
Delaware is the second smallest state in the United States and is known for its lack of state sales taxes. It is considered a business-friendly state, and creating a nonprofit may seem unnecessary. Tax exemption, however, is only one reason to start a nonprofit in Delaware.
Starting a nonprofit takes passion and strength, but you can make a world of difference. Navigating the intricacies of bureaucracy and organizational planning, however, can be daunting. We’re here to help you walk through the process of forming your organization and meeting all the requirements at the various state and federal levels.
Are you ready to get started? Great! We’ve broken this complicated process down into simple, actionable steps.
Pro tip: As you follow these steps, check out Donorbox’s Beginner’s Guide. It will help you navigate the many effective online fundraising tools Donorbox offers and learn how they can help you motivate and connect with your donors once you’ve started your Delaware nonprofit.
Choosing a name for your nonprofit is a personal decision, but your state also has expectations and limitations. In Delaware, your organization’s name must include one of the following words or abbreviations:
Before you choose a name for your Delaware nonprofit, check to see if it’s available in your state here.
Need some help coming up with a name? Check out Donorbox’s Naming and Branding Worksheet.
After deciding on a name, you have two choices when it comes to your organization’s structure in the state of Delaware: exempt and nonstock. Exempt organizations do not have to pay Delaware’s annual franchise tax, but nonprofits must meet 501(b) tax exemption with the state to qualify.
Here are the qualifications –
To be an exempt organization in Delaware, you must fill out the Certificate of Incorporation for Exempt Corporations.
Before moving on to state and federal documentation, you will need to finalize a few internal details. One of those is choosing your nonprofit’s mission. A mission statement can help explain to potential donors and the public why, who, and how you’ll make a difference. When filling out the Delaware Certificate of Incorporation and the IRS tax-exempt application, you must use the exact wording on all forms to describe your nonprofit’s purpose.
Pro tip: A well-thought-out mission statement is an excellent tool for this. For guidance, check out our article on how to write an awesome mission statement!
Many nonprofit start-ups misunderstand the importance of a business plan. A business plan can help you outline your organization’s purpose, operational goals, and financial plans and make the process of completing state and federal documents much easier.
The first section, an Executive Summary, is the last thing people read in your business plan. Executive Summaries share your nonprofit’s mission, why it’s being formed, how it will satisfy a community need, and explain your ideal donor.
The programs and services of your nonprofit detail exactly how you plan to meet your community’s needs. Be sure to give as many details here as possible to explain complex concepts to potential donors and funders, including images and infographics.
As a nonprofit, you have two sets of consumers. While fundraising is primarily focused on donors, you must also sell your organization to those who need your services. Luckily, your business plan can help you outline and prioritize the services you offer and how you stand out from other organizations in the community. You can use market research and analysis in this section to better understand your primary donor and beneficiary.
An operational plan must include details on your nonprofit’s primary location, legal requirements, government, and organizational structure. This section can also include programs and services and an organizational chart.
A free resource to get you started: Download this guide to see different organizational chart types in action and learn how each works.
An impact plan will explain how your nonprofit will meet its mission and will help you create an annual report and share your successes in the future. Whenever possible, use statistics to back up your claims.
New nonprofits don’t have financial statements and reports to add here, so it’s best to look at other organizations to see where they find funding. In your financial plan, list potential revenue streams and explain how donors and foundations can significantly help you meet your goals.
This section is where you will list board members and high-level staff. Providing resumes, promotional material, and your organization’s annual strategic plan is also essential.
The final internal step is to form a team to help you create a strong organization. Delaware only requires one director and one officer. The same individual can hold both positions, but if you hope to qualify for tax exemption with the IRS, you must have a minimum of three directors. In most cases, you’ll need more board members and officers to meet your organization’s needs.
Now is the best time to develop a training and onboarding system for new board members. Write job descriptions and a board manual, and break your team into committees to help with fundraising, governance, etc.
Delaware has no residency requirements for directors or officers, and term requirements are until a successor is elected. Your organization’s requirements must be defined in your bylaws or a board resolution.
Delaware does not require you to live in the state to have a Delaware corporation, but you must have a Registered Agent located in the state. Registered Agents receive legal notices for nonprofits. They can be an individual or business and must have regular business hours.
Now, it’s time to file state documents. The first step is to file a Certificate of Incorporation for Exempt Corporation. This is only a template, so visit the IRS website for the specific language required. You must also include a cover letter with this document, including your name, address, and phone number. Make sure the name and purpose of your corporation are the same as those of other state and federal documents – remember, this is where having a mission statement can help!
The fee to file is $109. If your document is more than one page, include $9 for each additional page. You can expect it to take up to three weeks to receive a response, but you can also expedite your application for $50 (24 hours) to $1,000 (one hour). When finalized, you will receive a stamped “filed” copy of your submitted documents. You can request a certified copy for an additional $50.
The next step to start a nonprofit in Delaware is to get an Employer Identification Number from the IRS. This number will be used when filing for tax-exempt status, opening a bank account, and hiring staff. You can file immediately online or four to five weeks by mail.
Before applying for tax-exempt status with the IRS, you’ll want to hold your nonprofit’s first board meeting. This step should be easy for you since you’ve already formed your board of directors. Do your best to ensure all board members are present at this meeting so that you start on the right footing.
You’ll elect board officers during the first board meeting and assign board members to committees if you haven’t already done that. You’ll also develop and approve your organization’s bylaws and conflict of interest policy. It’s also best to approve a resolution to open a bank account.
Your bylaws are a roadmap to running your organization and must include the following:
Your nonprofit’s Conflict of Interest Policy details how to respond when the board, volunteers, staff, and donors have competing interests.
The IRS rewards federal tax exemption for organizations with the following purposes –
Churches do not have to file for tax exemption with the IRS, but many do so to increase their authority and trustworthiness.
Nonprofits 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 nonprofits must file Form 1023 and pay $600. It can take up to six months to receive your determination letter from the IRS.
Delaware has no state or local sales taxes or sales tax exemption certificates. You must, however, register to withhold income taxes on employees working within the state and register with the Delaware Department of Labor.
One way it’s easier to start a nonprofit in Delaware compared to other states? Delaware does not require nonprofits to register before soliciting donations.
While most Delaware nonprofits won’t have to obtain licenses and permits before soliciting general donations, many will want to hold a fundraising raffle. The Delaware Board of Charitable Gaming oversees bingos, raffles, and other charitable games.
Nonprofits must get a gaming permit before advertising, holding any charitable gaming event, or selling raffle tickets. Raffle permits are $5 for a single drawing or $15 for a series of drawings. The total retail cash value of the prize(s) is $5,000 or more.
Note: Nonprofits must also withhold income tax for prizes valued at $5,000 or more and file W2-G forms with the IRS.
Nonprofits in Delaware must file an annual report by March 1 of each calendar year following their incorporation. This applies to the first year after your Certificate of Incorporation becomes effective. There is a $25 filing fee.
An annual report can be a powerful marketing tool for your nonprofit. Use images and infographics to show donors’ impact and share the report on your website and social media platforms.
Starting a nonprofit in Delaware requires dedication, planning, and commitment. The steps outlined in this guide will help you transform your vision for your organization into reality. As you embark on this journey, remember paperwork and procedures are only part of the process. It’s also about creating a positive image and powerful change in your community.
Staying true to your mission, engaging with your team, and leveraging available resources will help you build a strong foundation for your organization. Donorbox is here to help you now and for years to come.
When you’re ready to get started, check out this list of affordable features from Donorbox for an idea of how we can help you fulfill your mission through a suite of innovative fundraising tools.
Donorbox also supplies weekly articles and resources to help manage and fundraise for your new nonprofit. Sign up for our e-newsletter to receive updates, tips, and resources in your inbox.
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