Chicago is the first place that comes to mind for most people when you mention Illinois. There is more to Illinois than Chicago. The state of Illinois has the sixth largest population in the United States, and that population is highly varied. Hence, if you are thinking of how to start a nonprofit in Illinois, let us tell you, you’re on the right track.
In Chicago alone, you have communities of people from all over the world. As you go further south, the population becomes more homogenized, but you would be surprised you are in the same state. In Southern Illinois, they can seem more akin to their neighbors in Kentucky and Missouri than to Chicagoans.
This variety of people offers many ideas and opportunities for new nonprofits. If you are thinking of starting a nonprofit in Illinois, you have come to the right blog. From naming your organization to choosing a board and filing all legal paperwork, our step-by-step guide will help you get through the process.
A name like the Chicago Bulls can bring up memories of watching the team win championship games with Michael Jordan. The name of Lincoln can evoke great pride in what our country can do. The name Champagne can remind someone of their college years.
Names trigger emotions and reactions we could not imagine. When choosing your nonprofit’s name, you will need to remember that and choose a name that stands out in the crowd.
Naming your nonprofit is not always easy, but it may be a lot easier if you have a well-developed mission. Your organization’s mission is the reason you exist, who you are going to help, and how you will help them. Keep this mission in mind when deciding on a name.
In Illinois, there are a few requirements that must be followed when choosing your nonprofit’s name. You can include corporation, company, incorporated, limited, or any similar abbreviation, but it is not required. You also must include NFP if the corporate name implies that it is organized for any other purpose than stated in the articles of incorporation.
Finally, the name you choose cannot be like any other organization registered with the state. Visit The Office of the Illinois Secretary of State to see if your name is available and register it right away.
After registering your name, the next step is to find a leadership team for your organization. An Incorporator is the person who signs the Articles of Incorporation for your organization. This person does not need to be a board member but can if you choose. You need at least one Incorporator but can have more than one.
Your board members are important at the beginning of your organization and will determine the direction your nonprofit takes as the years go on. The state of Illinois has some requirements for your board of directors.
Illinois nonprofits must have at least three board members. That does not mean you need to have only three. In fact, as your organization grows, you may need more board members to take on different projects and fundraising activities. Read more about How to Find Nonprofit Board Members.
There is no residency or membership requirement for board members in Illinois nonprofits, but any board of director’s committees must have at least two board members. They must also make up most of the committee unless the committee is meant to elect directors.
When choosing officers for your board of directors, rules should be stated in your nonprofit’s bylaws. The only state requirement for officers is that one officer, usually the Secretary, must certify your corporate records.
In addition to your organization’s Incorporators and Board of Directors, you will need a Register Agent. The Registered Agent is responsible for receiving legal notices for your organization and can either be an individual or business. They must be located in the state of Illinois and be open during regular business hours.
Now that you have a well-defined mission and a strong leadership team, you are ready to start filing the legal paperwork to create your nonprofit. The filing of your Articles of Incorporation marks the official start of your nonprofit.
Filing your articles of incorporation with the state requires Form NFP 102.10. This application will ask for basic information like:
In Illinois, a nonprofit must be organized for one of the thirty-three purposes listed in the General Not for Profit Corporation Act of 1986.
The state of Illinois does not require all the wording the IRS requires for 501c3 status, so it is important to research and include the required IRS wording in this document on your own.
Due to the inclusion of this wording, you will need to file your articles of incorporation by mail. Submit your articles with the signatures signed in black ink. The filing fee by mail is $50, and it will take two weeks to be approved. Remember to keep a copy of your articles of incorporation for your organization’s files.
Once you have filed your articles of incorporation, you are ready to receive an Employer Identification Number (EIN) from the IRS. An EIN is a nine-digit number the IRS gives to all organizations in the United States. This number will be used to open a bank account, apply for tax-exempt status, and file your taxes.
IRS Form SS-4 can be filled out online and is free to apply. The response for this online form is immediate. Print out and keep this form for your nonprofit’s files as well.
By this time, your initial Board of Directors should be finalized and ready to hold their first meeting. During this meeting, your board will need to approve the organization’s bylaws and conflict of interest policy, elect all officers, and sign a resolution to open a bank account along with any other official documents that have come up in forming the organization.
Your bylaws are a map of how your nonprofit will run. Bylaws generally include the following:
It is vital to keep the wording of your organization’s purpose the same on all legal documents. When filing your Articles of Incorporation, writing your bylaws, and applying for 501c3 status the purpose of your organization must be exactly the same, or you risk losing tax-exempt status with the IRS.
This is where your organization will state which officers are required, their term limits, and what responsibilities they will hold.
Not all organizations will have memberships, and it is not required in the state of Illinois. If your organization chooses to include memberships, it is crucial to define your membership eligibility, dues, and rights of your members here.
According to the state of Illinois, the terms of your board members will be until the next election, which is generally each year. If your board decides to hold their elections differently, Illinois requires you to state that in the organization’s articles of incorporation or bylaws.
The state also requires that quorum is met by a majority during board meetings. Other details you should include here will be the number of board meetings that will be held each year.
Committees are an essential part of any board, and your bylaws are where you can start to detail how the board will play a part in your organization. As required by the state, your board committees must include at least two board members, and they must make up the majority of each committee unless the committee is to elect board members.
Board members take on a lot of responsibility when joining a board and can put themselves and your nonprofit in financial danger with their actions.
Nonprofits should look into purchasing insurance to protect their board members and the organization in case someone chooses to sue the organization for inappropriate behavior. Professional Liability & Directors and Officers (D&O) Insurance is available for this situation.
The Board of Directors is responsible for hiring and firing an Executive Director to run the daily operations of your nonprofit. The board must include this authority in the bylaws for their authority to be recognized.
Unfortunately, not every individual who wishes to join a board is always doing so for good reasons. Your organization should include a Conflict-of-Interest policy in your bylaws to determine how to handle situations when a board member acts against the organization’s best interest. Check Form IRS 1023 for IRS guidance on this subject.
Your organization’s bylaws will need to be amended at one point or another. It is essential to make this process and simple and straightforward.
Finally, if your nonprofit needs to close, your organization’s bylaws must include a dissolution clause. These clauses will determine how any remaining assets are distributed.
Want to know difference b/w501(c)(3) & 501(c)(6)? Here is our detailed comparison for nonprofits.
As an Illinois nonprofit, you are exempt from state income and sales taxes with a 501c3 federal tax-exempt status. To apply for sales tax exemption, you will need a state identification number. To receive this number, fill out Form REG-1 online, by mail, or in-person with the Illinois Department of Revenue. It is free to file, and you must remember to keep a copy for your organization’s records.
To receive tax exemption from the IRS, you will need to fill out Form 1023 or Form 1023-EZ. Requirements for filling out Form 1023-EZ are listed on the application. If you can file the EZ form, the cost is $275, and if accepted, you should receive your letter of determination in less than one month.
The cost for Form 1023 is $600 and will take three to six months to receive your letter of determination. This form is also longer and will take more time and patience to complete. Remember to keep a copy of all documents for your organization’s records.
Once you have received your letter of determination from the IRS and your Illinois State Tax Identification Number, you can apply for sales tax exemption with the state of Illinois. To receive sales tax exemption with the state, you will need the following:
Remember to use the same language here as you have used on every other legal document.
Brochures and other documents that include your organization’s purpose and activities
Illinois requires all nonprofits to register every year with the state before soliciting donations. The registration form, along with additional required documents, must be filed with the state within six months of the nonprofit’s fiscal year. The fee for filing this form is $15, but two late fees can cost your organization a total of $300 if you are not careful.
To register with the state, you will need to include the following in your application:
Illinois does not require any business licenses for nonprofits, but if you plan to raise funds through bingo, poker, or other games of chance, your organization will need to register with the Illinois Department of Revenue – Office of Bingo and Charitable Games for a two-year license. A two-year license with the state will cost $400, but it can bring in quite a bit of funding for your organization if done right.
Local licenses may also be required for these games, so be sure to check with your regional government offices.
Illinois is a unique state. It includes one of the largest cities in the country, tight farming communities, the home of one of America’s greatest presidents, and several quality universities. It is also home to over 22,000 nonprofit organizations.
By starting a new nonprofit in Illinois, you are showing a willingness to join this wonderful community and make a difference in the lives of people in this state. We are excited to help you along the way. Visit the Donorbox blog for more tips on fundraising, program, and organizational development. Visit our website for a list of online features we have for nonprofits of all sizes.
In this section, we’re about to answer some of the common questions regarding how to start a nonprofit in Illinois.
Most of the cost to start a nonprofit in Illinois will actually be paid to the IRS. To get federal tax-exempt status, you will need to file Form 1023 or Form 1023-EZ with the IRS, which costs $600 or $275, depending on the form.
The cost paid to Illinois will be for the following:
It will take your nonprofit anywhere from one month to three to six months to receive your letter of determination from the IRS. The length of time depends on whether you file Form 1023 or Form 1023EZ for federal tax exemption.
Most state forms can be filed online with an immediate response, but if you are filing for tax-exempt status, your Articles of Incorporation will need to be mailed and will take at least two weeks for approval.
Yes, your nonprofit will need to register for an Illinois state tax identification number to receive your state income tax and sales tax exemption.
Yes, all nonprofits are required to register with the state each year. This allows donors to research the organizations before donating.
In Illinois, nonprofits must file an Annual Report with the Secretary of State. Your organization will receive a reminder 60 days before the due date, but it must be filed before the first of your anniversary month each year.
There is a $10 fee, and this report can be filed online for all domestic nonprofits.
While the state requires only basic information on this form, a detailed annual report for your nonprofit can be useful for several reasons. Donors, grant foundations, and corporations look for this type of information when making larger funding decisions.
As a new organization, this is an opportunity to introduce yourself and your fundraising goals, your plans for donor outreach and volunteer recruitment, and your organization’s programs and team members. By making this easily available on your website and other organization profiles, you can stand out in a crowded field. Learn more about How to Write an Effective Nonprofit Annual Report.