Kentucky, renowned for horse racing, bourbon, and cultural heritage, harbors a lesser-known yet thriving nonprofit sector. You can be part of this vibrant nonprofit scene with this step-by-step guide. Our guide delves into the essential steps required to establishing a nonprofit organization in Kentucky, providing a roadmap for aspiring changemakers and community builders.
Kentucky is known for horse racing, bourbon, coal, and, of course, Kentucky Fried Chicken, but did you know there are 21,789 tax-exempt organizations in Kentucky? These organizations, from small churches to large regional charities, are making a difference in the lives of others every day. If you’re ready to join the ranks and start a nonprofit in Kentucky, we’ve got a step-by-step process to help!
The state of Kentucky currently has no easy step-by-step guide for starting a nonprofit, so we’re here to help. The following details can help you file required federal and state applications and develop a solid foundation for your organization. Plus, use our free Start-a-Nonprofit Checklist to guide you!
First things, first – pick a name! According to Kentucky statutes, nonprofit names must end with corporation, company, or limited or the abbreviations, Corp., Inc., Co., or Ltd. If your nonprofit includes the word “company” or its abbreviation, it cannot be immediately preceded by the word “and” or &. Your name cannot also end with the words “professional service corporation” or P.S.C.
If you have difficulty finding a name that works for your new nonprofit, check out this nonprofit naming checklist. Once you’ve narrowed down your choices, make sure to search for available names in Kentucky here.
Your nonprofit’s name is only the first step. When filing state and federal applications, you must include your organization’s purpose. 501(c)(3) nonprofit organizations’ purposes must benefit the public with one of the following:
If you’re one of these organizations, you already have a great start, but your unique purpose or mission statement must explain why you exist, who you serve, and how you serve them.
It’s crucial to finalize your nonprofit’s mission statement early on so that all applications include the same details. A strong mission statement will also help you develop a compelling business plan.
Many founders don’t spend time on a nonprofit business plan initially, but it’s actually the best time to do so. A business plan can help you:
When writing your business plan, you should include the following sections to help you complete required state and federal applications and solicit start-up funds.
When starting a nonprofit, you must have a solid picture of how the organization will fulfill your mission. Including your nonprofit’s programs and services is the best way to do this. You may not have the details finalized yet, but an overview will start you on the right foot. Provide images and infographics to explain complicated details to the public.
Marketing outreach is also essential in the beginning, but your marketing plan will include more than events and social media posts. Understanding your target market should be the first thing on your mind. Look at other nonprofits and learn how they reach their donor base. You’ll also want to look towards your community to find potential partners. These partners can include similar charities, churches, businesses, and foundations.
An operational plan detailing the day-to-day activities will help you create your nonprofit’s bylaws. Your board must write and vote on these bylaws before applying for tax-exempt status with the Internal Revenue Service (IRS).
Remember to list any necessary legal and insurance requirements in your operational plan.
The effect your nonprofit has on your community is its greatest appeal to funders. Whether applying for grants, soliciting major donors, or creating campaign flyers for the public, you must share your organization’s impact. Your impact plan should specify how your programs and services will change the community.
New nonprofits don’t have bank statements and financial reports, but there are many things you can include in your first financial plan. Research similar nonprofits to see how much they raise from events, grants, and significant donations. Create a fundraising plan to solicit start-up costs and introduce your mission to the public.
Pro tip: Donorbox makes raising funds easy with a simple signup process and online fundraising tools that seamlessly integrate with your website.
An executive summary is the first thing the funders read, but it should be the last thing you write. An executive summary gives an overview of your business plan and describes your organization’s mission plan, target market, and how you’ll meet the needs of your community.
The appendix is where you can add any additional documents to explain or promote your organization, including:
An Incorporator will sign your nonprofit’s Articles of Incorporation. You must have one but can have more. Kentucky also requires corporations to have at least three directors who serve at least one year. The Internal Revenue Service also requires 501(c)(3) nonprofit organizations to have a minimum of three board directors, but they recommend more to ensure you run and fundraise successfully.
Kentucky corporation officer requirements must be defined in your nonprofit’s bylaws or board resolutions. You must have at least two board officers, one to take minutes of directors’ and members’ meetings. The same person can hold both offices.
Nonprofits must have a registered agent to receive legal notifications on behalf of the organization. This can be an individual or corporation, but must be located in the state and hold regular business hours.
Kentucky nonprofits can file articles of incorporation online or by mail.
Your articles of incorporation must include:
The filing fee for an article of incorporation in Kentucky is $8; checks must be made payable to the Kentucky State Treasurer.
After filing your articles of incorporation, you need to get an employer identification number (EIN) from the IRS. An EIN is a nine-digit number you use to apply for tax exemption, hire employees, open a bank account, and apply for business licenses and permits.
You can file Form SS-4 immediately online or by mail. Organizations will receive a certificate of acknowledgment from the secretary of state’s office immediately if filing online. To keep Form SS-4 current, use Form 8822-B to report changes to your primary location, address, or responsible party.
This board meeting is an opportunity to elect your officers, assign board members to committees, and start onboarding and training. During this meeting, you’ll also approve your organization’s bylaws, conflict of interest policy, and a resolution to open a bank account.
Bylaws are a map for your nonprofit’s leadership to follow. They must include the following:
A conflict of interest policy provides rules to follow when individuals in leadership have conflicting priorities.
After your first board meeting, once you’ve finalized your nonprofit bylaws and conflict of interest, you can apply for tax-exempt status with the IRS. Most nonprofits will apply as 501(c)(3) organizations must have purposes that benefit the public. These organizations file either Form 1023-EZ or Form 1023.
Nonprofits that earn under $50,000 for the first three years can file Form 1023-EZ for $275. You must fill out an eligibility worksheet to determine if your organization qualifies. All other 501(c)(3) nonprofits must file Form 1023 and pay $600.
501(c)(4) nonprofits benefit their members and must use Form 1024 and pay $600 to file for tax-exempt status with the IRS.
It can take up to six months to receive your determination letter from the IRS.
Filing for federal tax exemption does not mean you’re automatically exempt from paying taxes in Kentucky. Nonprofits must apply with the Kentucky Department of Revenue to purchase personal property, digital property, or services without paying sales and use taxes to suppliers. To file this application, you must include your articles of incorporation, a detailed schedule of receipts and disbursements, and your letter of determination from the IRS.
Before soliciting donations, Kentucky nonprofits must also register with the Attorney General’s office. You’ll need:
There is no filing fee required.
While this may not be necessary at the beginning, you’ll likely want to hold a raffle to raise money for your nonprofit at some point. A raffle is an excellent way to solicit funds and connect with new donors. Nonprofits must apply with the Department of Charitable Giving before holding a raffle.
All Kentucky organizations must file annual reports with the Secretary of State by June 30th every year. File your annual report for $15. Nonprofits can also use annual reports to solicit gifts from foundations and donors. You can share your organization’s annual report on your website, social media platforms, and third-party websites like Guidestar.
Starting a nonprofit in Kentucky is a journey laden with purpose and potential. As you navigate the intricacies of registration, governance, and compliance, each step brings you closer to your vision. Staying committed to your mission and laying a solid foundation will make all the difference.
Visit our website to see how Donorbox can help raise funds for your new nonprofit.
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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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Kristine Ensor