When dreaming about your nonprofit, you will think about who you will be helping, how you will change the world, and how quickly you will make a difference. You most likely won’t be dreaming about all the laws and regulations required.
The IRS and the state of South Carolina each have rules for you to follow in order to register your name and organization, file for your taxes, and register for charitable solicitation. Each of these steps will include paperwork and fees. To help you with this process, we have included a 13-step list here.
Naming your organization will be the first step in the process of starting a nonprofit. When choosing a name in South Carolina, you will want to see if your name is available. You can search for your business name here.
When deciding on your nonprofit’s name, make sure it cannot be confused with another registered company.
An Incorporator will sign the Articles of Incorporation for your nonprofit. You must have one Incorporator but can have more if you would like.
Your Board of Directors is the governing body of your organization. Your board members are expected to attend board and committee meetings, promote the organization, fundraise. To ensure each member is aware of their commitments, an on-boarding process and distinct rules are helpful.
In South Carolina, you must have a minimum of three directors. Most nonprofits will have more depending on the size and structure of the organization. South Carolina also requires that board members be naturalized persons. There are no residency or membership requirements in the state.
A board member term will depend on your organization’s bylaws, but in South Carolina, the terms range from one to five years maximum. South Carolina also requires a majority to meet quorum during voting.
Your Board of Directors will need different committees to address financial and legal obligations, along with fundraising events and campaigns.
In addition to your board members, it is necessary for your organization to have a minimum of three officer positions, President, Secretary, and Treasurer. Two or more of these offices can be held by the same individual.
Your nonprofit will also need a Registered Agent. This role can be held by an individual or company. The Registered Agent is responsible for receiving legal notices for your organization. They must be located in the state of South Carolina and have regular business hours.
The official start of your nonprofit is when you file your organization’s Articles of Incorporation. This paperwork can be filed online or by mail. If you decide to mail this application, you will need to include two copies of the form and a self-addressed stamped envelope. You will also need a cheque payable to the South Carolina Secretary of State for the $25 filing fee.
When filling out your Articles of Incorporation, the following is required:
This statement must be the same as it is stated in your bylaws
When you file your Articles of Incorporation in South Carolina, you must include the 501c3 attachment to be qualified for 501c3 status with the IRS.
The Employer Identification Number (EIN) is a 9-digit number that all companies need to file federal taxes and hire employees. The SS-4 form can be filed online, by mail, phone, and fax. If filed online, you will receive this number immediately. Any other way of filing will take up to 4 to 5 weeks by mail. Be sure to print your EIN before closing the link online and save it with your nonprofit’s important paperwork.
After filing your Articles of Incorporation, you must file an Initial Report with the South Carolina Department of Revenue. Your EIN and a $25 fee are required with this form. If you are late filing this return, you will receive a 5% penalty per month that does not exceed 25%.
Your organization must develop and vote on your organization’s bylaws to file for 501c status. When writing these bylaws, keep the wording the same across all legal paperwork, like your Articles of Incorporation and your 501c tax application.
Your bylaws are a type of roadmap to follow and should address the following:
Once your organization’s bylaws have been developed, your Board of Directors will need to vote to establish them. This vote will take place during the first official meeting of the Board of Directors. Your nonprofit’s Bylaws and Conflict of Interest policy must be voted on and adopted before applying for 501c3 status with the IRS.
During the first meeting, your board will also elect all members and its officers and finalize any other policies needed to get started on the right foot. An excellent example of this is a signed resolution to start a nonprofit bank account.
Remember to keep the minutes of this first board meeting and all following meetings for your records. For more tips to make taking meeting minutes easier, visit our blog post on running an effective board meeting.
In South Carolina, your organization will need a state tax identification number or account whether you receive tax-exempt status from the IRS or not. To receive this number from the state, you must file Form SCDOR-111. The fee for this form depends on the taxes and permits required for your business. You will receive the identification number once the application is approved.
As a nonprofit, your organization likely qualifies for exemption from paying federal taxes. To determine whether you will receive this exemption, you must apply with the IRS using either Form 1023 or 1023EZ if you are a charitable organization.
Form 1023 will cost your organization $600, and it will take 3 to 6 months to receive your letter of determination. Form 1023EZ is for smaller organizations. This application fee for this form is $275, and it should take less than 1 month to receive your letter of determination.
If you are a nonprofit that does not qualify for 501c3 status as a charitable or religious organization, you may still be eligible for tax exemption. Form 1024 is the application to use if your organization is a nonprofit that may fall under 501c2-501c25 status.
All 501c3 nonprofits are exempt from paying South Carolina state income tax after receiving their federal tax exemption.
Once you have your tax determination letter from the IRS, be sure to mail it to the South Carolina Department of Revenue. You do not have to file with the state to become tax-exempt, but if you have any unrelated income, you must file Form SC990T.
In the state of South Carolina, nonprofits are also exempt from paying sales tax for items purchased for resale. Any items used by your nonprofit are not tax-exempt in this state. There is no fee to file for this tax exemption, but you must file Form ST-387.
Before you start raising funds for your organization, nonprofits must register with the South Carolina Secretary of State. Organizations must submit a Registration Statement for a Charitable Organization each year and send their IRS 990 form.
The filing fee for this form is $50 plus a $2 online fee. If you are late in registering your nonprofit with the Secretary of State’s office, your organization can be fined $2,000.
Once you have registered with the Secretary of State, your organization is listed on the state’s Charities Brochure. This allows donors to check your status with the state and feel confident in their gifts. It also allows nonprofits another avenue of marketing to promote their organization.
There are no statewide licenses or permits to start a nonprofit in South Carolina, but local laws may vary. It is best to research all local laws to determine if there are any local license or permit requirements. This is especially important when it comes to holding a raffle or game of chance fundraising game.
Nonprofits are a unique entity in the United States. In the state of South Carolina, they are making a difference and changing lives. The process to start a nonprofit in the state can be overwhelming, but we hope our step-by-step guide makes the process easier.
If your nonprofit is looking for affordable online fundraising options, visit our website to learn more. For more tips on starting a nonprofit, building a board, and online fundraising, check out our blog.
In this section, we have answered some commonly asked questions on how to start a nonprofit in South Carolina.
South Carolina corporations no longer need to file an Annual Report to remain in good standing. While it is not required, nonprofits should have an annual report available on their website for donors, potential sponsors, and foundations. Your annual report can provide donors with financial details and updates on each of your nonprofit’s programs.
You must file IRS Form 990 with the IRS every year. It is best to get a professional accountant to help.
Yes, your nonprofit must re-register with the Secretary of State every year.
The cost to start a nonprofit in the state of South Carolina depends on the size and status of your organization. Different applications with the state and IRS will cost separate fees:
Generally, the necessary forms in the state of South Carolina can be filed and returned immediately. The most time-consuming part of starting a nonprofit will be waiting for your determination letter from the IRS. If your organization files Form 1023EZ, it will take less than one month to receive your determination letter. If you file Form 1023, it will take three to six months.
Your nonprofit can be an LLC if it is owned by one tax-exempt nonprofit organization and meets the IRS requirements.