The state of Washington is home to 52,777 nonprofit organizations. Together these organizations employ 590,789 people and have combined revenue of $125 billion.
Some of the most reputable, well-known, and successful nonprofits making their mark in Washington’s nonprofit sector include TisBest Philanthropy, Operation Write Home, and Alliance For International Women’s Rights.
An essential part of starting a nonprofit in Washington is applying for federal tax exemption. Along with the tax-exempt status come many benefits such as limited liability, perpetual existence, discounts on US postal services, and more.
It could take you anywhere between two weeks to three months to get your nonprofit registered and legally operating in the state, provided you have completed the relevant forms and complied with the relevant laws.
Nonprofit organizations are created for various purposes and causes; however, they all have one thing in common: they are created for the greater good of the natural world or humanity.
The following step-by-step guide will show you how to start a nonprofit in Washington.
1. Select a name for your organization
All nonprofits in Washington are required to have a name that represents their cause. Therefore, the name you choose for nonprofits will ultimately distinguish their brand and image.
The Washington nonprofit name should also comply with the Washington naming requirements and should be easily found by potential stakeholders and donors.
Consider the following naming guidelines when deciding on a name for your Washington nonprofit:
- You may only use the term “public benefit” in your nonprofit’s name if your nonprofit is deemed to be a public benefit organization by the Washington Secretary of State
- Additionally, if your organization is deemed a public benefit organization, it should adhere to the following guidelines
- The Washington nonprofit name must not include the words Inc., company, limited partnership, corporation, LTD, or partnership, nor any abbreviations of these words
You may want to conduct a name search on the Secretary of State website to ensure that the name is still available
Lastly, in the event, you plan on creating a website for your nonprofit organization, determining whether the name is available as a web domain is also recommended.
2. Nominate a Washingtonregistered agent
Every business entity will need to receive official mail, legal paperwork, and service of process. Therefore, it is required that your Washington nonprofit organization appoints a designated individual to fulfill this role.
The appointed individual is known as a registered agent, resident agent, statutory agent, or service of process agent. Their primary role within the organization is to receive important legal documents on the Washington nonprofit’s behalf.
Therefore, the registered agent is also your nonprofit’s point of contact with the state of Washington.
You may appoint anyone to be a resident agent of the nonprofit organization; however, they must meet the following requirements:
- The registered agent must be a resident of the state
- They must maintain normal business hours
- They must have a physical address in the state of Washington
- They must be at least 18 years of age or older
- They must consent to the appointment
3. Recruit your board members
Another requirement to have your Washington nonprofit registered and incorporated with the state is recruiting corporators and initial directors for your organization.
You need to recruit at least one incorporator, although you may have more than one. When it comes to recruiting directors, you need to have at least three directors who have no relation to each other.
They do not need to be residents of the state, nor do they need to be members of the nonprofit organization. The term of service is indefinite until a successor is elected and qualified.
You’ll also need to nominate officers to fulfill the roles of president, vice president, secretary, and treasurer.
An important note is that while two more people can hold the same office, the roles of president and secretary may not be held by the same person.
4. Consent to bylaws and conflict of interest policy
In order to have tax exemption eligibility and apply for 501(c)(3) status, your nonprofit is required to establish important governing documents. These governing documents are known as the bylaws and conflict of interest policy.
The bylaws are rules that outline the operating procedures of your organization, while the conflict of interest policy is put in place to ensure that all decisions made pertaining to the nonprofit are always in the best interest of the organization’s mission and not to further the personal agendas of members.
Neither one of these policies need to be filed with the state, however, they should be kept on file for reference as and when needed.
The governing documents are basically your nonprofit’s internal operating manual and should be established and ratified during the organization’s first board meeting.
5. Select a Washington nonprofit startup corporation structure
The state of Washington has different types of organizational structures. So this step in the process is dependent on you deciding on the legal form for your corporation.
Typically, charities take the legal form of a nonprofit public benefit corporation. However, other nonprofits are formed as trusts or associations.
You should seek legal advice to determine what legal form is best for your nonprofit. Thereafter, you’ll need the necessary forms available on the Washington Secretary of State Corporations Division website to incorporate your nonprofit.
Other types of organizations or types of nonprofits include mutual benefit and religious corporations. Mutual benefit corporations are formed typically to benefit their members. This includes business leagues and social clubs.
Religious organizations are usually churches and other places of worship.
6. Prepare and file nonprofit Articles of Incorporation
Perhaps the most essential step in the process of forming a Washington nonprofit is preparing and filing Articles of Incorporation. Your nonprofit entity is established and officially created by filing Articles of Incorporation with the Washington Secretary of State. However, prior to doing so, you need to make sure it includes some basic information like:
- Your nonprofit’s name
- The nonprofit’s registered agent’s name and office address
- Incorporator’s name and address
- The directors and initial Board of Directors‘ names and addresses
Additionally, in keeping in line with the IRS provisions, your Articles of Incorporation will need to include a purpose. The purpose is basically the organization’s mission statement and explains the purpose or cause your nonprofit is being created for.
Next, you need to include a distribution of assets clause, also known as a dissolution statement. It basically describes what the nonprofit’s assets are currently being used for and what will happen to the assets in the event of dissolution.
You’ll find the Articles of Incorporation Form or template on the Washington Secretary of State Corporations Division website.
7. File an initial report
Once you’ve filed the Articles of Incorporation, the next step is filing an initial report. You’ll receive the necessary Form mailed to you by the Secretary of State along with your formation certificate.
File the initial report with the Washington Secretary of State Corporations Division. Please note that the initial report is due within 120 days of incorporation or qualification.
8. Secure an EIN (Employer Identification Number)
An Employer Identification Number is also referred to as a Federal Tax Identification Number. The Internal Revenue Service assigns this unique 9-digit number to identify for-profit and nonprofit business entities in the state.
In order to obtain an EIN, you should complete and file Form SS-4 and submit it on the IRS website. The application is free of charge, and so is obtaining your EIN. The quickest way to obtain an EIN is to submit the application online. In this case, you’ll receive it immediately.
However, take note that the IRS website is operational during specific hours only, and therefore you’ll need to print your EIN prior to closing your session in order to receive it instantaneously.
With your Employer Identification Number in hand, you’ll be able to open a corporate bank account for your nonprofit corporation, hire employees, and also submit the number as and when needed for federal and state tax purposes.
9. Apply for federal tax exemption
Your Washington nonprofit needs to apply for federal income tax exemption. Obtaining 501(c)(3) tax-exempt status comes with various privileges and benefits like accepting tax-deductible donations, qualifying for discounts from US postal services, and limited liability for your Board of Directors.
However, prior to being an exempt organization, the nonprofit must have carried out the following tasks:
- Your nonprofit must have elected at least three directors who have no relation to each other
- Your nonprofit must have adopted important governing documents, which is the bylaws and conflict of interest policy
- Your nonprofit must have already filed the Certificate of Formation or Articles of Incorporation
- Your nonprofit must have obtained an Employer Identification Number
Once you’ve fulfilled the above-mentioned tasks, you can go ahead and file Form 1023. Small business organizations are free to file IRS Form 1023-EZ.
The relevant form must be filed with the Internal Revenue Service.
After receiving the application, the IRS will review and approve it. If it’s approved, you’ll receive an IRS determination letter stating that your Washington nonprofit is now one of the existing organizations that are tax-exempt under the Internal Revenue Code.
In the event that your application for federal tax exemption is declined, you’ll receive a letter of explanation detailing why the application was not successful.
10. Apply for Washington state tax exemption
Once you’ve obtained federal income tax exemption, your organization must also file to obtain state income tax exemption. This needs to be done with the Washington Department of Revenue.
Additionally, obtaining an exemption from state sales tax is also a requirement in the state of Washington. This may be done with the Washington Department of Revenue. Further guidance and information is provided on the Washington Department of Revenue Nonprofit Organization‘s Guide.
11. Other applicable permits and licenses
Based on your nonprofit location and scope of activities or services, you may need to apply for one or more licenses or permits.
However, in the state of Washington, a statewide business license is not required in order to conduct activities.
Checking with the licensing administration in your county or city is advisable to determine the requirements for your nonprofit organization.
Additional state registration and reporting requirements
Prior to fundraising or participating in charitable solicitation in Washington, your nonprofit will need to register with the Washington Secretary of State Charities Program. If organizations in the state of Washington conduct charitable solicitation, they are considered public charities or charitable organizations and therefore must comply with Washington state law.
12. Submit an annual report
After receiving tax-exempt status, your nonprofit will want to remain in good standing with the state. One of the ways to do this is to file an annual report with the Secretary of State. The annual report should include essential information regarding your nonprofit’s members. This is also an opportunity to update any information that has changed.
Costs of starting a new nonprofit in Washington
The following filing fees are applicable to all Washington nonprofits:
- Articles of Incorporation: $30 by mail. $80 expedited by mail. $50 online.
- Application for federal income tax exemption or 501(c): $275 or $600 IRS fee
- Washington Business License Application: $19, if applicable
- Washington Charitable Organization Registration: $60 ($0 if exempt)
Next steps
After you’ve started your nonprofit, there are a few necessary steps that you should take to keep your organization running smoothly. Let’s take a closer look at them below:
Open a business bank account
- Maintain accounting and tax filing
- Ensure that your personal assets are kept separate from your nonprofits’ assets
To open a bank account, you will need to provide:
- Your EIN
- A copy of your articles of incorporation
- A copy of your organization’s bylaws.
Hire a business accountant
- Simplify payroll and bookkeeping
- Prevent your nonprofit from avoiding penalties and tax errors
- Manage your nonprofit’s funding
Obtain insurance
- Focus on growing your nonprofit
- Manage risks
You may opt for General liability, Personal liability, or Worker’s compensation insurance.
Build a website
As we mentioned earlier, you may want to create a website for your organization to legitimize your business or give it more credibility. A dedicated website is also one of the best ways to share your nonprofit’s vision, mission, and story with supporters. Consequently, it’s also a great way to announce upcoming events and goals.
Sign legal documents
One aspect that tends to get overlooked is signing legal documents in your personal capacity instead of as an authorized representative of your nonprofit.
If you’ve appointed yourself as a registered agent of the nonprofit, then the following tips will help avoid personal liability:
- State the registered name of your nonprofit
- Use your name and signature
- State your position/role in the organization as its authorized representative
When signing legal documents on behalf of the nonprofit, it is important that you do so in your capacity as the registered agent, as opposed to your capacity as an individual.
Example: Instead of signing your name only, state the name of the nonprofit and then your name and position within the organization before signing.
FAQs
Using social media to leverage fundraising activities is essential. Generating social media fundraising campaigns allows nonprofits to ask their fans and followers to share content with their network, mentioning a hashtag. Ultimately, it’s an opportunity to reach beyond your own network and spread your message far and wide.
A private foundation is considered an independent legal entity that is set up purely for charitable purposes. Private foundations get funding from one source, typically an individual, corporation, or family, while public charities derive their funding from the general public.
Public charities typically receive funding from a limited number of sources. Financial support for public charities is available through sponsorships and donations from both individuals and public or private organizations. Public charities are also able to earn their own income via fundraising drives and selling products and services.
Fiscal sponsorship is when certain organizations that have already received their federal tax exemption offer their services to nonprofits that are currently in the process of receiving tax-exempt status. This service is beneficial to nonprofits that have either been declined for federal income tax exemption or are still awaiting their IRS Determination letter.
Nonprofits are allowed to make a profit. However, the key difference between for-profit organizations and nonprofit corporations is that nonprofits are not allowed to distribute their profits to any private individual. The revenue generated by the nonprofit’s activities must be cycled back into the organization to further the cause.
