Last Updated 16 August 2017 | By:

How To Form a 501(c)(3) NonProfit In Illinois

How to Use this Guide

Use the guide below to form a 501(c)(3) nonprofit in Illinois. Keep in mind that the process requires forming a nonprofit corporation and getting tax-exempt status with the IRS.

Since the overall process is extremely complex, we highly recommend consulting with an attorney or using a service like Harbor Compliance for personalized top-to-bottom nonprofit formation and obtaining IRS 501(c)(3) status.

Step 1) Secure Your NonProfit Name

Choose a Business Name

The most important step, pick a name! Choose a unique name, not too similar to another registered name. Keep in mind that there are a number of other naming rules, so be sure to bookmark the 805 ILCS 105/104.05 which are the specific sections within the IL Nonprofit Act covering corporate naming regulations.

Follow these steps:

  1. Choose a name, and ensure it is available by conducting a Name Availability Search.
  2. If needed, request a Reservation of Name Application to reserve your name for 90 days ($25 fee).

Step 2) Appoint A Registered Agent

Choose a Registered Agent

When starting a nonprofit, you are required to designate a registered agent to handle official documents on behalf of your business. They must be a person residing in Illinois or a business entity legally registered with the Illinois Secretary of State and have a physical address (No P.O. boxes!) where legal notifications can be received. They also must be available during regular Monday through Friday business hours.

Follow this step:

  • Designate a registered agent by electing someone within your company, hiring an outside professional, or starting a nonprofit through a service such as Harbor Compliance (see details) and receiving a qualified Registered Agent free of charge!

Step 3) Select Incorporators & Directors

Choose the Initial Directors

An incorporator is simply the individual(s) who deliver your Articles of Incorporation to the state so they can be filed and make your nonprofit official. Directors on the other hand are those who help you run your nonprofit.

Follow these steps:

  1. Select 1 incorporator to deliver your Articles of Incorporation to the state to be filed.
  2. Select 3 initial directors to oversee your nonprofit until formed new directors are voted in.

Note: These initial directors will be listed in your Articles as well. Your official directors and their number will be stated in your bylaws once voted in. It would be a good idea to work with an attorney or incorporation provider during this foundational step because there are important corporate formalities to learn!

Step 4) Draft NonProfit Bylaws

Register an LLC

Your bylaws define your nonprofit – structure, management, and governance. See this Bylaws Fact Sheet from TheLawProject.org which is very helpful. Common nonprofit bylaws include:

  • Detailed info on principle and registered agent offices.
  • Management, procedures, and responsibilities of the board.
  • Details on each office – Pres., Secretary, Treasurer, etc.
  • How to go about Adding/Amending bylaws,
  • How to handle other corporate formalities required in the state.

Follow this step:

  • Use resources such as this Corporate Bylaws Template so you can customize your bylaws, but also get an idea for what they look and sound like. Your bylaws will be voted on and adopted or amended in your initial meeting in Step 7.

Step 5) File Articles Of Incorporation

Business Licenses

Once you and your team decide it’s time to form the initial corporation before the law and in the public record, file your nonprofit Articles of Incorporation. Some data includes:

  • The name, type, duration of existence, and statement of purpose (provisions for nonprofit vs corp);
  • Complete names & addresses of registered agent (and office), incorporators, and directors.
  • Any specific provisions/bylaws set forth as part of the internal operations of your organization.
  • A stipulation of apportioning assets to any 501(c)(3) upon termination of your organization.

Follow these steps:

  1. File your Articles by mail by downloading the form here.
  2. Bookmark the IL Guide for Organizing Nonprofit Corporations PDF and check IRS Publication 557 on the IRS website to get comprehensive information regarding your filing.

Filing Fee: $50

Step 6) Start Corporate Records Book

File Annual Reports & Publication Requirements

Think of this as the ultimate nonprofit binder that contains hard copies of the most important documents, especially state-level filing papers, major contracts, and any legal notices. Are they required? No. But, they’re default within the corporate/nonprofit world and come highly recommended for organizational/professional reasons.

Follow these steps:

  1. Collect your important documents and start your records book!
  2. Go to your local office supply store or go to Amazon, or even use one of these Corporate Kits where you can brand the include book/binder for as little as $99!

Step 7) Conduct An Initial Meeting

Hold a Meeting with Your Board of Directors

Now it’s time to conduct your first nonprofit meeting which is going to be very organizational/foundational in nature. Follow these steps:

  1. Conduct your meeting and record “minutes” of the meeting. You’ll need to have it signed by all attending directors. Use this Corporate Minutes Template.
  2. The meeting agenda should look something like this:
  • Take attendance and show you have a quorum (minimum number needed).
  • Appoint temporary officers, chairmen, secretary, CEO, etc.
  • Adoption or amendment of the bylaws set down in Step 4.
  • Where to set up a bank account (Step 10), file state reports, etc.

Those are the basics, but depending on the nature of your nonprofit and how many members/directors are at the meeting there could be a lot more to discuss. It’s a huge move in the right direction though, so celebrate afterwards!

Step 8) Get An EIN

Get an EIN for Your LLC

Whether you intend on hiring paid employees or not your nonprofit needs to have an EIN or an FEIN, which means a 9-digit Employer Identification Number. In essence, it’s like a social security number but it tracks your financial activity to ensure compliance with state/federal tax laws.

Follow this step:

  • Register for an EIN at the IRS Website quickly and completely free of charge.

Step 9) Handle Licensing & Exemptions

Small Business Taxes

It’s time for your nonprofit to become 100% compliant in terms of not only licenses/permits, but state and federal taxes. You should be able to apply for tax exempt status now that the corporate entity is established.

Follow these steps:

  1. Download IRS FORM 1023 – Application for the Recognition of Exemption under Section 501(c)(3), or Form 1023-EZ, which is the streamlined form but must be under $50k annual gross receipts and $250k in assets.
  2. Bookmark the IL of Revenue and the Attorney Gen’s Charities Section to get more information.
  3. If you need help, check out Business License Research packages that take care of some legwork.
  4. Utilize some of these other great resources if you need additional help! Chicago Small Business Admin office or the Sec. of State’s Business Services. There are near endless ways in which the nonprofit and business community work together for the betterment of all!

Step 10) Setup A Business Bank Account

Best Business Bank Account

We saved the best for last. After everything above, and with your EIN in hand, you can now choose which institution to form the financial foundation of your nonprofit. Don’t be hasty here.

If you aren’t familiar with this side of banking, there’s a lot more to it because it’s a corporate account. This means there are different fee structures, financial services, and permissions involved. How many people will be using this account? Be sure that it isn’t mixed with any other accounts, business or personal, so that you’ve got a clean and tidy record of transactions!

Follow this step:

  • If you haven’t appointed a CFO, be sure that you or someone else takes time to research different local, state, and national banks/credit unions.