Use the guide below to form a 501(c)(3) nonprofit in Alabama. 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.
Choosing a great name is the first step in the process of forming a nonprofit in Alabama. Branding your organization is as important as it is exciting, so you need to keep a few restrictions in mind. Your brand name:
Your nonprofit’s name should concisely communicate your mission to the world. Before folks hear anything else about your brand, they’re going to hear its name, so make sure it’s memorable.
First, do a name search to find out if your ideal name is available in Alabama. If it is, head over to GoDaddy and check out what domain names are up for grabs. Once you’re pleased with your brand name and domain name selections, go ahead and secure both of them.
Unlike most other states, Alabama requires you to file a name reservation request for your brand name ($28 online or $10 by mail). In fact, you’ll need to include a copy of your request form along with your Certificate of Formation. Reserving your domain name isn’t a legal requirement, but it’s a wise idea to lock one down, even if you aren’t planning on creating a website right away.
Before you can officially form your Alabama nonprofit, you need to appoint an initial board of directors and an Alabama registered agent.
When deciding on initial directors, make sure to choose folks who are passionate about your mission, somewhat business-savvy, and willing to invest time and money to reach common goals. Sure, this initial board may be temporary, but they could still have a significant impact on your organization in its early stages.
Alabama does not clearly stipulate how many directors you need on your nonprofit board, but the Certificate of Formation includes space for 3 names. A minimum of 3 directors is also required for IRS tax exemption, so this number seems to be the sweet spot.
Once you’ve got your directors in tow, together you can start thinking about registered agent services. A registered agent in Alabama may be a business or individual that’s responsible for receiving tax forms, service of process notices, and other legal documents on behalf of your organization. In Alabama, you’re allowed to act as your own registered agent, but if…
… it’d be in your best interest to delegate the job to a professional.
If you or one of your directors is considering acting as your organization’s registered agent, read over our registered agent guide first to get more details on what you’re signing up for. Alternatively, if you’re leaning toward hiring a professional, check out our Harbor Compliance to get the ball rolling. They offer free registered agent services when you form your nonprofit with them.
This is a big step for your nonprofit. Once you file your Certificate of Formation, you’ll officially be recognized as an Alabama nonprofit organization — although not a 501(c)(3), yet.
Alabama’s Certificate of Formation will ask you for the following:
You may also be able to pay by credit card, but check with your local Judge of Probate’s office before you provide this information at the end of the form. Although you’ll make your payment to the Secretary of State, you’ll actually submit everything above to your Judge of Probate for evaluation.
Although we’ve outlined the DIY approach above, our official stance is that all Alabama nonprofits seeking 501(c)(3) status should leverage professional help. Forming any business is tricky, but meeting all the requirements needed to get federal tax exemption is a whole other ball game. Take a look at our top 7 nonprofit formation services if you’re interested in a fail-proof approach to forming your 501(c)(3).
Next on the agenda is getting your EIN (Employer Identification Number). An EIN is like a social security number for your nonprofit.
It’s the federal government’s vehicle for keeping track of your financial activity — and trust us, they’re going to keep a close eye along the road to tax exemption and beyond.
You can easily apply for an EIN via the IRS online application. This method is totally free and super efficient — you’ll get your EIN as soon as you complete the application.
Keep in mind, however, that if you end up using a super-comprehensive nonprofit formation service, you may not actually have to apply for an EIN yourself. Many of these providers’ pre-bundled packages automatically include EIN assistance.
Keeping a corporate records book is a good idea for any corporation, even a nonprofit one. While this isn’t a legal requirement, it’s a surefire way to make your life easier. The point is to keep your records organized, including your:
All of these documents, and more, will have a safe home in your corporate records binder. You also have the option to invest in a nonprofit corporate kit, which would include extra pieces like a custom seal, membership certificates and beautifully printed bylaws.
Since your nonprofit won’t need all the same goodies that for-profit corporations get in their corporate kits, we recommend seeking out nonprofit-specific ones. Blumberg and Bindertek both offer kits and binders specifically designed for nonprofit corporations.
If you don’t feel like you need any extra frills, you can always swing by a local office supply store and see if you can get a better deal on a simple professional binder there. Again, corporate kits aren’t legally required, so it’s up to you to decide what features would most benefit your organization.
Grab your corporate records book and rally your directors — it’s time to conduct your first board meeting!
Your organizational meeting is when you’ll:
You’ll also nail down your nonprofit bylaws at this meeting. Your bylaws will serve as the governing document of the organization. Having thorough, well-rounded bylaws will not only help you achieve tax-exempt status, but also guide your nonprofit in the future. They’ll allow your board to prevent disputes, or resolve them promptly.
If all of this sounds foreign to you, don’t go into this meeting blind. A great practice when you’re writing your bylaws or recording meeting minutes is to work off of a template. Rocket Lawyer offers free templates specifically for nonprofits, which is great since the leadership/ownership structures of nonprofit and for-profit corporations are quite different. Take a look at their bylaw templates and meeting minute templates.
Once you’ve gotten this far, give yourself a pat on the back — it’s finally time to apply for tax exemption and obtain your 501(c)(3) status!
Applying for federal tax exemption requires filing Form 1023 with the IRS. The application is quite lengthy, and the waiting period can be long too (up to 180 days), so it’s a big deal to get it done correctly. Your organization might be eligible to file Form 1023-EZ instead, which is shorter and has a faster turnaround time (within 90 days).
To find out if your organization meets the criteria for the streamlined application, read through the Form 1023-EZ Instructions (the eligibility worksheet starts on page 11).
Once you earn your 501(c)(3) status, you should also qualify for exemption from Alabama state taxes. Unfortunately, there’s no online application for this — you’ll have to contact the Alabama Department of Revenue directly.
Again, we highly recommend delegating this task to a professional since it bears so much weight on the future of your organization. Harbor Compliance is one of the most thorough nonprofit formation services available. In addition to filing your Certificate of Formation with the state, they’ll also take the reigns on your IRS filing and guarantee your 501(c)(3) status.
Finally, it’s come time to set up a bank account for your nonprofit! Ideally you’ll have already discussed various banking options during your initial board meeting, keeping in mind:
Different banks have different characteristics in each of these categories, and it’s important to find the right balance based on your organization’s needs.
Depending on your nonprofit’s priorities, a local or a national bank could be your ideal scenario. Do some research on both, starting with our top 5 business bank accounts reviews. Compile a short list of options and get contact with their customer service, either on the phone or in-person. Ask about what perks, if any, they offer 501(c)(3) nonprofits, and find out what documents you need to bring to setup an account with them.
Once you’ve settled on a bank and opened your account, sync it with an accounting software right away. Especially as a 501(c)(3) nonprofit, it’s incredibly important to keep, and be able to prove, orderly finances. Each year you’ll have to file an annual return with the IRS, and if it isn’t done properly you could risk losing your tax-exempt status. So, be proactive — check out our accounting software recommendations!
If you want to be 100% sure every document is filled out and filed completely, accurately, and on-time, we recommend leveraging a professional filing service.
For 501(c)(3) nonprofits specifically, Harbor Compliance is your best bet. Their services are definitely an investment, but obtaining your tax-exempt status will pay off in the long run!