How To Form a 501(c)(3) Nonprofit In Delaware

How to Use this Guide

Use the guide below to form a 501(c)(3) nonprofit in Delaware. 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) Verify & Choose A Name For Your Nonprofit

Choose a Business NameFirst things first, you need a great name to represent your nonprofit. Your organization’s name should:

  • Be distinguishable from any existing business or organization in Delaware. This essentially means that your nonprofit cannot have the same name as any other entity that’s registered in the state of Delaware.
  • Include one of the following suffixes, depending on the nature of the nonprofit: “Company”, “Foundation”, “Corporation”, “Club”, “Fund”, “Incorporated”, “Institute”, “Society”, “Union”, “Syndicate”, “Limited” or “Association”.

Keep in mind that your nonprofit name is the first real branding decision you’ll make for the organization, so spend some time thinking over exactly what you want your brand name to communicate. You’ll want to find a name that represents your organization’s central message and will attract other passionate individuals to your cause.

 

What To Do:

To find out whether or not your ideal name is available, you can run a quick name search here.

Once you find a name that meets the criteria outlined above, you can either reserve it (for a $75.00 fee) or wait until filing your Certificate of Incorporation to lock it down. You may also want to search GoDaddy for a good domain name at this time, even if you’re not planning on creating a website right away.

Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your business. Use WEEBLY to search your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name that’ll make it easy for customers to find you!

Step 2) Appoint A Registered Agent & Initial Directors

Choose a Registered AgentBefore you can file your Certificate of Incorporation, you’ll need to choose a registered agent.

Your Delaware registered agent may be an individual that’s resident of the state, or a business registered to operate in the state. They’ll be in charge of receiving important legal documents on your behalf, including tax forms and service of process notices. You are allowed to act as your own registered agent in Delaware, but there are a few reasons why you should think twice before committing. For example:

  • If you’re unable to commit to maintaining normal (M-F, 9-5) business hours at your work or home address.
  • If you work from home and are not comfortable making your personal address public.
  • If you’re afraid of being served in front of family, friends or customers.

This is also a good time to start thinking about your initial board of directors. Although their names won’t be requested on your Certificate of Incorporation, it’s still a good thing to have nailed down as soon as possible (definitely before step 5).

When choosing directors, your priority should be finding people who share a passion for your mission and have some degree of business experience. Your board of directors may change over time, but it’s important to have reliable, dedicated individuals working on the organization in its beginning stages.

 

What To Do:

Have a quick read through our registered agent guide if you’re considering acting as your own. It’s important that you fully understand what’s legally required of you before signing up for this task.

If you’d prefer to go the third-party professional route, I’d recommend checking out Harbor Compliance’s registered agent services. They include a year free in their comprehensive 501(c)(3) formation package!

Step 3) File Certificate of Incorporation

Business LicensesThis is a huge step for your organization — once you’ve filed your Certificate of Incorporation you’ll be officially recognized as a Delaware nonprofit corporation (although not tax-exempt, yet)! Delaware’s Certificate of Incorporation template asks you to provide:

  • Your nonprofit’s name
  • Your registered agent’s physical address, mailing address and full name
  • The purpose of your organization, and written confirmation that your corporation will serve as a nonprofit
  • Any and all conditions of membership

…and a few other pieces of information. (Refer to the template itself for more details!)

Once everything has been properly filled out, mail the document and $89 filing fee to the following address:

Division of Corporations

John G. Townsend Building

401 Federal Street, Suite 4

 Dover, DE 19901.

 

What To Do:

There are several ways to file your Certificate of Incorporation, one being the DIY approach we’ve just discussed. However, our top recommendation is to look into the comprehensive nonprofit formation services offered by Harbor Compliance.

Harbor Compliance is one of the only online filing companies that handles tax exemption, formation documents, and registered agent services. Filing for 501(c)(3) status is far more complicated than any other aspect of the business formation process, so you’re definitely going to want help once you get to this step.

Step 4) Get An EIN

Get an EIN for Your LLCNow that you’ve filed your Certificate of Incorporation, it’s time to get an EIN for your organization. An Employer Identification number, or EIN, is used by the federal government to track your organization’s financial activity.

All corporations are required to have EINs, but they’re especially important for nonprofits seeking 501(c)(3) status, as your finances will be under even more scrutiny.

It’s a good idea to get your EIN before making any major financial moves. It’s also a requirement for setting up a business bank account and filling out IRS forms, so plan ahead and check this off your to-do list ASAP.

 

What To Do:

The good news is this is a pretty simple process. All you need to do is head over to the IRS website and fill out their online application. It’s totally free and you’ll get your identification number as soon as you finish. We think this is the best option because it’s the most efficient, but if this approach doesn’t suit you, we outline others in our EIN guide.

Also, keep in mind that if you’re planning to purchase a comprehensive 501(c)(3) package from a provider like Harbor Compliance, you’ll have this part taken care of for you!

Step 5) Meet With Directors & Discuss Bylaws

Choose the Initial DirectorsNow it’s time to schedule your first meeting with your awesome board of directors. This organizational meeting represents a critical point for your organization, where you and your directors have the opportunity to breathe life into your nonprofit. You should plan on discussing pretty much every aspect of how your organization will run, including:

  • Each director’s title and duties
  • The length of directors’ terms
  • How often the board will meet
  • Conditions for adding/amending bylaws
  • What decisions can be made with/without a meeting

During this meeting, you’ll also create your nonprofit bylaws, which will serve as the governing document for your organization. You’ll also record your very first meeting minutes at this time.

 

What To Do:

You’re about to make a number of significant decisions for your organization, so don’t go into this meeting unprepared. Do some research on what should be included in your nonprofit bylaws, as well as how to record meeting minutes. Using meeting minute and bylaw templates is a great place to start your research, as they’ll give you an idea of the key topics to address.

Step 6) Start A Corporate Records Book

File Annual Reports & Publication RequirementsAt this point you’ve acquired a number of important documents, and it’s essential to have a safe place to keep them. While having a corporate records book isn’t a legal requirement, it’s a wise decision to have a safe, organized place to house documents like your:

  • Certificate of Incorporation
  • EIN
  • Tax forms
  • Nonprofit bylaws
  • Meeting minutes

At the bare minimum, you should get a simple binder designated for your nonprofit’s records. On the other hand, you may also choose to invest in a nonprofit corporate kit. Most corporate kits include things like a custom seal, membership certificates, printed bylaws, and some other unique pieces to demonstrate the legitimacy of your organization.

 

What To Do:

It’s totally possible to find a sufficient corporate records binder at a local office supply store. But, if you’re leaning toward getting a professional corporate kit, you might want to take a look at Blumberg or Bindertek. They cater specifically to nonprofit corporations, which is great since nonprofits have different needs than for-profit corporations.

Step 7) Apply For Tax Exemption

Small Business TaxesNow here comes the most intensive part of starting your 501(c)(3) nonprofit: applying for federal tax exemption. This is by far the most time-consuming document you’ll encounter and the longest waiting period you’ll experience throughout the formation process, so it’s important to get it right the first time around.

Depending on the size of your nonprofit (along with a few additional factors) you’ll either have to fill out Form 1023 or Form 1023-EZ. The EZ version is the shorter, more streamlined option. It also has a quicker turnaround time, so it’s worth checking to see if your organization qualifies.

To find out, open up the Form 1023-EZ Instructions and scroll down to the Eligibility Worksheet on page 11. If you answer “yes” to any of the questions, you’ll need to apply using the full-length version.

 

What To Do:

Applying for federal tax-exemption is an incredibly time consuming process, so it’s important to seek out legal assistance here. Harbor Compliance is our favorite provider for 501(c)(3) filing, but you could also choose to collaborate with an attorney instead.

Both are reliable options, and both require investing some money. The investment will be worth it though, since you’ll be able to rest easy knowing your tax-exempt status is guaranteed.

Step 8) Set Up A Bank Account & Manage Finances

Best Business Bank AccountNow that you’ve jumped over all the legal hurdles, it’s time to open up a bank account and start properly managing your organization’s finances!

As we’ve mentioned, keeping a careful eye on your finances is even more important for tax-exempt nonprofits than other entities. You’ll be closely monitored by the federal government to ensure that you continue to meet the qualifications for tax exemption, so there’s no room for mixing personal and professional expenses here!

When choosing a bank for your organization, think about a number of different criteria and which qualities are most important to your organization, including:

  • Customer service
  • National ATM accessibility
  • Online features
  • Minimum account balances
  • Nonprofit-specific incentives

Hopefully you’ll have already discussed all this at your organizational meeting, but if not, make sure to consult with your board members before committing to a bank.

 

What To Do:

Do some research on local banks and credit unions in Delaware, such as WSFS, Artisans Bank and Wilmington Trust. Local banks often offer excellent customer service and helpful perks for small businesses.

That said, we also encourage you to shop around national banks. Of our favorite banks, Chase and Bank of America have the most locations in Delaware. Feel free to read our reviews of these banks and our other top picks!

Finally, once you get your bank account set up, you’ll want to sync it with some accounting software — especially if you haven’t brought on an accountant yet. Check out our top 7 business accounting software tools for our vote on the best programs on the market.

Need Help Forming Your Organization?

How To Form a 501(c)(3) NonprofitStarting a 501(c)(3) in Delaware is no small undertaking, and somewhere along the way you’ll need the help of a professional. We highly recommend leveraging the expertise of an online filing service from the get-go.

Providers like Harbor Compliance will take care of nearly every step we covered in this guide on your behalf, and allow you to focus on other aspects of the organization that require your attention. Visit their website or read our review to learn more about their approach to 501(c)(3) formation!