So, you want to start a nonprofit in Tennessee? Well, you’re in good company. There are over 27,000 nonprofits in the state. In this article, we'll help you learn the ins and outs of Tennessee’s and the IRS’s rules and regulations and give you step-by-step directions to get started.
There are over 27,000 nonprofit organizations in Tennessee. Congratulations! You have decided to join this force for good. Thanks to you, the state of Tennessee is becoming stronger and healthier. Starting a nonprofit is not always easy. Hence, we have created this step-by-step article on how to start a nonprofit in Tennessee to help you along the way.
Do not get discouraged if it takes a little time. The work you are doing is worth the trouble. Let’s dive in!
Starting a nonprofit can be very personal. Your organization’s name can share the personal connection you have with your organization. When choosing a name, the state of Tennessee has made the process simple. All you have to do is make sure the name you have chosen has not already been taken. Visit the Tennessee Secretary of State’s office to search for available organization names.
An Incorporator will sign the Articles of Incorporation for your nonprofit. Your board of directors is the governing force of your nonprofit. Board Directors are expected to determine what actions are in the organization’s best interest, decide and vote on budgets, and connect with members of the community on behalf of the organization. There are legal and financial responsibilities for board members, especially your officers, so be sure to choose who will be on your board carefully.
You can have either one or more Incorporators, but once they are done signing the Articles of Incorporation, there will not be much for these individuals to do. This individual can be part of your Board of Directors or someone not affiliated with the organization.
Board Directors vote on any important board actions and accept your nonprofit’s budgets. Directors should also be part of board committees formed to find and train new members, run different fundraising events, or present to the community. While Tennessee does not require that a board member is on each committee, it is best practice to keep your board involved with their actions. There must be at least one person on each committee.
Tennessee requires nonprofits to have at least three board members. They must be natural persons, not companies. There is no requirement for these members to be residents of Tennessee, so if your organization hopes to become a national nonprofit, you can find directors located across the country to be part of your board.
All board member terms are for one year in Tennessee, with a maximum of five years. These term limits and a majority quorum should be stated in your organization’s bylaws.
In Tennessee, your organization must have a president and secretary. Most nonprofits will also have a vice president and treasurer to keep your board running smoothly. One of these officers must prepare minutes for each board meeting and authenticate the organization’s records.
Tennessee allows one person to hold two or more officer positions, but since you must have two officers sign legal paperwork, you will need at least two individuals as officers.
A Registered Agent will receive all legal notices for your organizations. The Registered Agent can be a person or a company. They must be located in the state, so if you are developing a national organization, it may be best to find a company to take this role. The Registered Agent must also be open during regular business hours.
After finding a name for your organization, you can file your articles of incorporation. Once you have filed this paperwork with the Secretary of State, you are officially an organization in the state. You can file this paperwork online, in person, or by mail. It will take 4 days to register by mail, 2 days online, and if you file in person, you will be able to finalize this process immediately. Regardless of how you file, there is a $100 fee.
When filing, you will need the following information:
You must include a statement that your nonprofit will not engage in activities unrelated to its purpose
You must next file for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). File the form SS-4 for getting this number. It’s a 9-digit number used to hire employees, apply for 501(c)3 status, file your 990s, and open a bank account. You can register for this number online, by phone, or by mail. Online and phone registration is immediate. It will take 4 to 5 weeks by mail. There is no charge for this number.
Your organization’s bylaws are one of its most important documents. Your bylaws provide a road map for board members and staff to follow. When writing your bylaws, you will want to include:
Pro tip: Board members have legal responsibilities and liabilities that can be costly if accused of wrongdoing. To help protect your board members and the organization, you can purchase insurance.
It is essential that the wording of your bylaws matches that of your Articles of Incorporation and 501(c)3 status (more on this later) application. We have an article of tips and the best practice to help write your organization’s bylaws.
Once you have written your nonprofit’s bylaws, you will need to hold your first board meeting to approve and adopt them. This meeting will need to be held prior to applying for 501(c)3 tax-exempt status with the IRS.
During this meeting, you will also need to hold elections for each board director and officer, vote on the conflict-of-interest policy, and create a policy to approve starting a bank account.
Make sure you have a quorum at this meeting and take minutes to save with all important legal paperwork.
Tennessee requires all corporations to have a unique state tax identification number. To apply for this number, you will need your EIN. Apply online at no charge.
Now it’s time for the fun part. Nonprofits are entitled to tax-exempt status with the IRS. This tax exemption saves your organization quite a bit of money and allows your donors to give tax-free donations. Many donors, foundations, and corporations will look at your tax-exempt status when deciding whether to fund your organization.
The application to file for 501(c) tax-exempt status is lengthy and can be confusing. The steps are detailed on the IRS website and give you a good idea of what to expect. Charities, foundations, religious, and educational organizations should file form 1023 or form 1023EZ.
If you have any questions about filling out these forms, visit our blog post on the subject.
Other social welfare organizations and nonprofits can file form 1024 to gain tax-exempt status.
It will cost your organization $275 to file Form 1023 EZ. It should take less than 1 month to receive your letter of determination. Form 1023 will cost $600 and can take approximately 3 to 6 months to receive your letter of determination.
Nonprofits are also exempt from paying sales or use tax in Tennessee. To register for this, you will need to file a certificate of exemption with the Department of Revenue before making any tax-exempt purchases. Out-of-state nonprofits can use their letter of determination to purchase tax-free products in the state of Tennessee.
Tennessee nonprofits are required to register with the Tennessee Secretary of State. Nonprofits that receive less than $50,000 per year can file for an exemption. Organizations can either file online or by mail. The cost for this form is $10, and it must be filed before soliciting donations.
To register for charitable solicitations, you will need the following information:
You may need additional business licenses or permits to run fundraising raffles or run other nonprofit activities. Visit your local county or city officials to see what permits you may need. You can also visit the Tennessee Smart Start guide for more help.
Nonprofits in Tennessee have successfully provided services to families living in poverty, protected the environment, and connected individuals and businesses within their communities. Adding your nonprofit to the tens of thousands of organizations already established will allow you to make a difference in your community. We hope the above article has made the process of starting your nonprofit easier.
If you are looking for fundraising help and an online donation processing system, visit Donorbox’s website and learn more about our affordable options.
In this section, we’ll answer the commonly asked questions about how to start a nonprofit in Tennessee.
The price to start a nonprofit is often based on the size of your organization. A few documents will require your organization to pay a fee to either the state of Tennessee or the IRS. Here is a list of the following documents and the costs involved:
Articles of Incorporation: $100
501(c) tax-exempt status: $275 or $600
Charitable Solicitation: $10
You can start a nonprofit in Tennessee in a matter of months. The following documents have a turnaround time of immediate to 3 to 6 months:
Articles of Incorporation
Employer Identification Number
501c tax-exempt status
Yes, you are required to file an annual report every year with the Secretary of State. You must file an annual report by the first day of the 4th month after your organization’s fiscal year.
It will cost $20 to file this report with a $2.25 online fee. You can also print and mail this report if needed. An annual report is necessary to remain in good standing with the Secretary of State, but there are other pros to creating an annual report for your organization. Major donors, foundations, and corporations will often look for an annual report for a better understanding of your organization when deciding to donate. Learn more about creating an impactful annual report that can get you more donations in the future.
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