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

How to Use this Guide

Use the Attorney Approved guide below (reviewed by Amy Toepper) 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

To secure and register your brand name it must be unique, and shouldn’t contain any restricted wording. Keep in mind that there are a number of other naming rules, so be sure to bookmark this section of the IL Nonprofit Act, which covers corporate naming regulations.

Follow these steps:

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

Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your organization. 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 website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name now.

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 organization. They must be a resident of Illinois, or a business entity registered with the Illinois Secretary of State. Either way, they must have a physical address where they’re available during normal business hours (Monday through Friday, 9 am to 5 pm).

You can designate a registered agent by electing someone within your company, hiring an outside professional, or forming your nonprofit through a service like Harbor Compliance to get a registered agent free of charge for one year (see details)!

Step 3) Select Incorporators & Directors

Choose the Initial Directors

An incorporator is simply an individual who executes the Articles of Incorporation so your nonprofit can be made official (you’re required to designate at least one). Directors, on the other hand, are in charge of helping run the nonprofit.

Follow these steps:

  1. Select at least one incorporator to deliver your Articles of Incorporation to the state.
  2. Select three initial directors to oversee your nonprofit until new directors are voted in.

Note: Your initial directors will be listed in the Articles of Incorporation, too. Official directors will be stated in your bylaws once voted in. It’s 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 will define the structure, management and governance of your nonprofit. 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

This Bylaws Fact Sheet from TheLawProject.org is very helpful if you’re unfamiliar with this type of document. Also, corporate bylaws templates are a great way to customize your bylaws but also get an idea of what they should look like. Bylaws will be voted on during your initial meeting (Step 7).

Step 5) File Articles Of Incorporation

Business Licenses

Once you and your team decide it’s time to officially form the nonprofit corporation, you’ll need to file nonprofit Articles of Incorporation with the state.

Some of the information you’ll need to disclose on this document includes:

  • The nonprofit name, type, duration of existence, and statement of purpose (provisions for nonprofit vs corp)
  • Complete names & addresses of registered agent, 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 this IL Guide for Organizing Nonprofit Corporations PDF and check Publication 557 on the IRS website for comprehensive information regarding your filing.

Filing Fee: $50

Step 6) Start Corporate Records Book

File Annual Reports & Publication Requirements

While there’s a variety of modern ways to track and compile your nonprofit’s important data, what we’re talking about here is a physical records book where you keep copies of all your essential documents. Is this required by the state? No. But it’s a great way to stay organized, and even assert the legitimacy of your brand.

Follow these steps:

  1. Collect your important documents.
  2. Search for a corporate binder at your local office supply store or on Amazon, or get a custom corporate kit.

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 will be very organizational/foundational in nature.

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.
  • Adopt or amend bylaws designed in Step 4.
  • Decide on a bank (Step 10), file state reports, etc.

Make sure to record meeting minutes and have them signed by all attending directors. (Use a corporate minutes template if you’re unfamiliar.)

Those are the basics, but there may certainly be a lot more to discuss. Regardless, this a huge move in the right direction, so make time to celebrate afterward!

Step 8) Get An EIN

Get an EIN for Your LLC

Whether or not you intend to hire paid employees, your nonprofit needs to have an EIN (Employer Identification Number). In essence, it’s like a social security number for your nonprofit — it tracks your financial activity to ensure compliance with state/federal tax laws.

Follow this step:

  • Apply through the IRS Website to get an EIN quickly and free of charge.

Step 9) Handle Licensing & Exemptions

Small Business Taxes

It’s time for your nonprofit to become 100% compliant in terms of federal/state licenses, permits and taxes. You should also 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 (the streamlined form — must be under $50k annual gross receipts and $250k in assets).
  2. Bookmark the IL Department of Revenue website and the Attorney General’s Charities Section.
  3. Leverage the help of the Chicago Small Business Administration office or the Secretary of State’s Business Services.

We highly recommend leveraging the help of a business license research provider, attorney, or comprehensive nonprofit formation service like Harbor Compliance for this step. Applying for 501(c)(3) status is incredibly complex, and they’ll make sure everything goes smoothly.

Step 10) Set Up A Business Bank Account

Best Business Bank Account

With your EIN in hand, you’re ready to choose the institution where you’ll form the financial foundation of your nonprofit.

If you aren’t familiar with this type of banking, it’s a bit more complicated than a personal bank account. There are different fee structures, financial services, and permissions involved.

If you haven’t appointed a CFO, be sure that you or someone else takes some time to research different local, state, and national banks/credit unions. That said, the most important thing is to make sure your nonprofit’s finances aren’t mixed with any other accounts (business or personal) so that you keep a neat and tidy record of the transactions!

Need Help?

How To Form a 501(c)(3) NonprofitIf you’d like help forming a 501(c)(3) Nonprofit in Illinois, we highly recommend looking into Harbor Compliance for personalized top-to-bottom nonprofit formation and obtaining IRS 501(c)(3) status.

They’ll handle everything on your behalf and be on-call for any questions you have. If you’d like more info, visit their website or read our review.