Consider Forming a 501(c)(3) nonprofit in Kentucky in a few easy steps:
To form a nonprofit corporation in Kentucky, follow the 4 easy steps listed below.
If eligible, it is also advisable that your Kentucky nonprofit obtains a 501(C)(3) status from the IRS, as this will enable federal tax exemption for your Kentucky nonprofit corporation.
Learn more about 501(c)(3) nonprofits here.
To start a 501(c)(3) nonprofit corporation in Kentucky you must:
Before You Start a Nonprofit
Registering a nonprofit is fairly simple, but building a nonprofit that can remain active beyond the first few years isn’t as easy.
Every year, people form a large number of nonprofits — many of which survive just a few years before closing down. To ensure your nonprofit has the best chance of making a long-term impact, make sure you first consider the following topics:
Things to Think About Before Starting a Nonprofit
1. Are you the right person for the job?
Starting and running a nonprofit isn't easy, and it takes the right kind of founder to have a better chance of success. Ask yourself the following questions:
- Am I disciplined? To build a prosperous nonprofit, you must have self-discipline and be willing to put in the work necessary to give your nonprofit the best chance of success.
- Am I trustworthy? Potential donors and members of the public need to trust you and your organization before they’ll offer their support. You must operate your organization with integrity and transparency.
- Am I determined? Founders must be determined to succeed — even in the face of obstacles. You must be able to focus on your goals and keep pushing forward.
- Am I decisive? Founders must have the ability to make decisions and act quickly. You also must actively seek feedback on your actions/decisions and adjust your organization’s trajectory, as needed.
- Am I focused? Founders need to focus on the big picture and avoid getting bogged down by small details and obstacles. You must establish a clear direction for yourself and everyone who works with your organization.
2. Is a nonprofit needed?
Conducting a needs assessment is a crucial step to help you determine if you should start a nonprofit in your community. During this research phase, you’ll learn more about your community, refine your target audience, and identify their needs. Some questions you should ask yourself — and your community members — include:
- Who’s your audience? Once you determine your nonprofit’s target audience, you should gather demographic information about that group.
- What does this group want or need? You may think you know the answer to this question already, but it’s worth asking them (if possible) or researching similar nonprofits serving other communities.
There are several different ways to conduct a needs assessment, but the overall goal remains the same: to help you decide if your community actually needs the type of nonprofit you want to start.
3. Is another oganization already fulfilling this need in your community?
After conducting a needs assessment, you should do some additional research to determine if another nonprofit already addresses this need in your community. According to the National Center for Charitable Statistics, more than 1.5 million nonprofits have registered with the Internal Revenue Service. If you find a larger organization already working on the same cause in your area, you may want to consider joining your efforts with its activities.
To learn more about nonprofits operating in your area, check with your state’s association of nonprofits.
4. What’s the purpose of your nonprofit?
Once you determine you’re the right person for the job, but before you begin the process of incorporation, you should clearly define the purpose of your nonprofit and draft your nonprofit’s mission statement. To do that, you must have a clear view of the following:
- Who: Who will your nonprofit help?
- What: What services will it provide to help those you’ve identified?
- Where: What will be your organization’s service area?
- Why: What’s your nonprofit’s objective?
- How: How will your nonprofit achieve its objective?
It’s also essential to consider whether or not your nonprofit will apply for 501(c)(3) status to qualify for federal tax breaks. To be eligible for 501(c)(3) status, your organization’s purpose must fall under one or more of the following categories:
- Testing for public safety
- Fostering national/international amateur sports competition
- Preventing cruelty to animals/children
After you create a clearly defined purpose and an initial mission statement for your nonprofit, you must ensure that every action or decision your organization makes adheres to its purpose and mission.
5. Who will support your cause?
As a new nonprofit organization, you’ll rely on the support of your community to join and/or donate to your cause. This is one reason why it’s important to have a laser-focused purpose and mission statement. They will help you drum up support for your nonprofit and give it the best chance of success. Do some research into the typical funding sources for nonprofits like yours and learn more about those organizations.
In addition, you must identify a board of directors when you form your nonprofit. These volunteers will not only donate their time, but also may share their expertise with the entire board. Think carefully about who may be interested in serving on your board and volunteering their time for your cause.
Ways Your Nonprofit Can Make Money for Your Cause
Because part of your organization’s purpose involves raising money for the cause you wish to support, it’s important to spend some time considering how your organization will raise money. Nonprofits typically make money in three main ways:
- Applying for Government Grants: Nonprofits typically receive grants for specific purposes and they don’t have to repay those funds. However, grant applications are lengthy and can be quite complicated. Many nonprofits choose to work with a professional grant writer and have them apply for grants on their behalf.
- Selling Goods and Services: Your organization also may choose to sell goods and/or services to generate revenue. Goods and services could include membership dues, merchandise, tickets to special events, and more.
- Receiving Private Donations: These donations can come from a variety of sources, including:
- Directors – Today, it’s common for a nonprofit’s board of directors to donate directly to the nonprofit. This shows members of the public that the directors are truly committed to the nonprofit’s cause.
- Individual Donors – The overwhelming majority of nonprofits raise money through contributions from private donors. Your organization may solicit contributions through its website, its social media accounts, or even the mail.
- Corporate Sponsors – Many corporations choose to donate to nonprofits to support certain causes and to write off the contribution on their tax returns. Research corporations in your local area or nearby cities that may consider donating to your organization.
- Major Donors – Your nonprofit also may seek contributions from major donors — those who make a donation equal to or more than a specific amount set by your organization. Many different types of people may express interest in becoming a major donor, especially those with a personal commitment to your cause.
- Fundraising Events – Most nonprofits host at least one event throughout the year. These events, which can range from galas to fundraising walks, are an excellent way to raise funds, build relationships with your donors, and interact with the community.
- Foundations – Foundations are typically designed to support charitable and nonprofit organizations. Some of them make direct donations while others offer grants. Research local, regional, and national foundations that may be interested in supporting your nonprofit.
How to Create a Business Plan for Your Nonprofit
First and foremost, your nonprofit is a business. Before you officially form your nonprofit, you must create a plan that outlines how the organization will generate revenue.
The biggest mistake nonprofit founders make is to incorporate and start soliciting donations before they have a solid business plan.
A business plan should include a description of your nonprofit and its purpose, a clear list of goals and the steps your nonprofit will take to achieve them, and a roadmap your organization will follow for the next few years. You’ll also need to update your nonprofit’s business plan as your organization’s goals change throughout the coming months and years.
Before creating your nonprofit’s business plan, you should ask yourself these three questions:
1. What will make your nonprofit unique?
Before you can develop an effective business plan for your organization, you need to understand what will make it unique. Is it the only organization handling this particular cause in your area? Do you have a list of donors already interested in donating to its cause? What are the reasons that’ll make it easy for your nonprofit to succeed?
2. How will you market your nonprofit?
While word of mouth can prove helpful, it’s rarely enough to ensure business success. This is especially true in the case of nonprofits. Before you start, you must have a solid marketing plan that covers such topics as:
- Your Target Market/Audience: You should already have conducted significant research into your target market/audience when you decided whether or not your community needs a nonprofit.
- How You’ll Communicate With Them: After identifying your target market/audience, you must determine the best way to communicate with them. That might involve phone calls, mailings, social media posts, targeted online search engine ads, and more.
- How You’ll Convince Them to Support Your Cause: As you learn more about your target market/audience, you also must determine your approach for convincing them to support your cause. For example, you may choose to research similar nonprofits in other areas, conduct market research surveys, or spend time reviewing relevant social media groups and websites.
3. How will you manage your nonprofit's finances?
Finally, before you begin crafting your business plan, you also need a clear idea of how your organization will handle its finances. Make sure you consider these key issues:
- Will your organization apply for grants? If your organization plans to apply for grants, you must decide:
- For which grants is your organization eligible?
- Who will write the grant applications?
- Are there any loans for which your nonprofit can apply? If your organization plans to apply for a loan to cover start-up costs and/or initial operating expenses, consider the following:
- Which lender will you choose?
- What are the repayment terms?
- What information do you need to gather to apply for the loan?
- Who will take responsibility for keeping track of the organization’s finances? Many organizations have a treasurer on their board of directors, but some don’t. Either way, you must decide the following:
- Who will be in charge of financial matters?
- Will this individual serve on the board of directors?
- What does your nonprofit expect from this individual?
- What type of financial oversight will you write into your organization’s bylaws?
- How much money will your organization need for day-to-day operations? Another key component of a solid business plan is a detailed picture of projected operating costs. You’ll need to address the following questions:
- Will your nonprofit have overhead costs, such as office space or raw materials (if you plan to sell a product)? If yes, what will those costs include?
- Will you have any paid staff members? If so, how many do you plan to hire and what costs are associated with their employment (e.g., job advertising, salaries, and benefits)?
- Will you need to hire people with technical knowledge, such as accountants and lawyers? Determine if your organization will rely on experts as well as if you’ll need to hire them for an initial period only or a longer-term role. Then, calculate the costs associated with hiring these experts.
Once you gather all of this information, you’ll be ready to start creating your business plan. If you don’t have experience developing business plans, check out the highly recommended LivePlan software. It’s based on other entrepreneurs’ experience creating business plans specifically for nonprofits.
Forming a nonprofit in Kentucky is easy, just follow these 4 steps:
Step 1: Name Your Kentucky Nonprofit
The name you select for your nonprofit will establish its brand. It is the first thing most people will learn about your organization. It is important to pick a name that both aligns with your mission and follows the rules of naming in Kentucky.
To learn more, read our How to Name a Nonprofit in Kentucky guide.
1. Nonprofit Naming Guidelines
- The name of you pick for your organization must end with “company”, “corporation”, “limited” or abbreviations “Corp.”, “Inc.”, “Co.”, or “Ltd.”
- You can read the official guidelines for the complete rules on naming a Kentucky based organization.
2. Is the Name Available?
The name of your nonprofit must be distinct from that of any other corporation in Kentucky. Use the Business Entity Search to make sure the name you have selected has not already been taken.
3. Is the Website Domain Name Available?
If you plan to have a website for your organization, you will want to make sure that a suitable URL is currently available on GoDaddy.
You may want to buy any URLs you are interested in, to make sure they are available when you are ready to finalize and create your website.
Step 2: Appoint A Kentucky Registered Agent
A nonprofit corporation in Kentucky is required to have a registered agent with a Kentucky address.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? A registered agent must be a resident of Kentucky or a corporation, such as a registered agent service, authorized to transact business in Kentucky. You may elect an individual within the company including yourself.
Step 3: Select Your Board Members and Officers
The directors of a nonprofit are responsible for overseeing the operations of the organization. The directors come together to form a board.
Features of directors:
- All the directors of an organization together form the board of directors.
- The power and influence of the directors over the organization is as the board of directors, the directors do not have authority as individuals.
- The board typically creates the policies that govern the nonprofit. The board of directors also oversee management-level hiring like that of the officers.
The officers of a nonprofit (such as the president or the secretary) are individuals with responsibilities, and the authority to execute based on their job descriptions.
Together, the officers and the board will come together to make up the organizational structure of your nonprofit.
An officer may also be on the board of directors and serve both roles if allowed to do so by the organizational bylaws created by your team.
The organization structure of your nonprofit in Kentucky MUST include:
- At least 3 directors not related to each other
- At least 1 officer who is responsible for recording meeting minutes.
To learn more, read our guide on how to select board members for your nonprofit.
Step 4: File The Kentucky Articles of Incorporation
To become a nonprofit corporation in Kentucky you must file the articles of incorporation for nonprofit corporations with the Kentucky Secretary of State.
Article 1: Name
Enter the name you selected in Step 1.
Article 2: Purpose
Describe the purpose of your nonprofit organization.
In order to qualify for 501(c)(3) status, the organization’s purpose must explicitly be limited to one or more of the following:
- Testing for public safety
- Fostering national/international amateur sports competition
- Preventing cruelty to animals/children
NOTE: You can read the IRS guidelines here.
Article 3: Registered Agent
Enter the name and address of the registered agent you selected in Step 2.
Article 4: Principal Office
Put in your organization’s principal address. If you do not plan to have a physical office you may use that of your registered agent.
Article 5: Directors
Enter the names and business addresses of the directors you selected in Step 3. Since this will become a public document, you can list a P.O. Box instead of a personal address.
Article 6: Incorporator(s)
An incorporator is any person filing the Articles of Incorporation for an organization. This may be you or a lawyer helping you with the process. Enter the name and address of each incorporator. You must have at least one.
Article 7: Effective Date of Organization
This section allows you to determine when you want your nonprofit corporation to officially form.
Typically the corporation forms on the date of filing but you can choose a date up to 90 days after the date of filing.
When you sign and date the form you are affirming everything written in the form. Your articles of incorporation will need a signature from an incorporator and from the selected registered agent.
To be eligible for 501c3 tax exemption you must attach an additional article to include provisions ensuring that in the event your organization is dissolved, the assets of the organization will be used towards tax-exempt purposes.
Section 5 of this sample document provides an example of these provisions required for 501(c)(3) eligibility.
There is an $8.00 filing fee which can be paid by check made out to “Kentucky State Treasurer.” You can send the Articles of Incorporation by mail or file them in-person.
Alison Lundergan Grimes
Office of the Secretary of State
P. O. Box 718
Frankfort, KY 40602-0718
Room 154, Capitol Building
700 Capital Avenue
Frankfort, KY 40601
Hours of Operation: 8:00 AM-4:30 PM ET
Nonprofit Operating Procedures and Housekeeping
Draft Bylaws And Conflict Of Interest Policy
There are two documents that will be central to the running of your nonprofit:
Bylaws: These are the rules that determine how your organization will be governed and run.
You can think about it as a constitution for your nonprofit. It makes the rules and priorities clear for everyone involved.
In your bylaws be sure to include:
- How the nonprofit will be governed – the role of directors and officers
- How meetings are held, voting procedures, electing officers or directors.
- How records will be kept and managed
- How disputes will be handled
- How bylaws will be added amended in the future
NOTE: Keep in mind that the bylaws will supplement any rules set forth by the federal government or the state.
Ready to get started? Check out these bylaws templates which you can customize to suit the needs of your organization.
The Conflict of Interest Policy: These are the rules set to ensure that decisions being made for the nonprofit are based on what is best for the organization, and not being motivated by what is best for individuals.
Under Appendix A the IRS provides a sample Conflict of Interest Policy.
NOTE: You will want to have both these documents drafted before for your first organizational meeting
Conduct An Organizational Meeting
An organizational meeting is the first official meeting of your nonprofit! Some of the things that are discussed in a typical organizational meeting:
- Taking attendance to show you have a quorum (minimum number needed)
- Appointing temporary officers, chairmen, secretary, etc.
- Adoption of the bylaws
- Adoption of conflict of interest policy
Don’t forget to record “minutes” of the meeting and have it signed by all attending directors. Here are some corporate minutes templates to help you get the ball rolling.
NOTE: This meeting must occur before your organization can apply for 501(c)(3) federal tax exempt status.
Get An EIN
An EIN or Employment Identification Number (also called a Federal Tax Identification Number or Federal Employment Identification Number), is used to uniquely identify a business entity. You can think of the EIN as a social security number for your nonprofit.
The EIN is required for your organization whether or not it will have any employees.
The EIN will be used for things like:
- Filing for 501(c)3 status
- Opening a bank account
- Applying for tax-exempt status
- Submitting tax returns
Once your nonprofit is formed with the Secretary of State, you can easily apply for an EIN for your nonprofit via Form SS-4.
NOTE: If you use a nonprofit formation service, EIN assistance might already be included in the package.
Open A Business Bank Account
You will typically need to take with you the following items to open a bank account for your nonprofit:
- The EIN for the nonprofit
- A copy of the nonprofit’s bylaws
- A copy of the articles of incorporation
If your nonprofit has several directors or officers, some banks may also ask for proof that you are authorized to open the account on behalf of the nonprofit.
There are many great options when it comes to picking a bank. Here are the reviews of the top 5 business bank accounts we recommend.
NOTE: It is always best to call ahead. Your bank may require some additional documents.
Start a Corporate Records Book (Optional)
As a nonprofit corporation, your organization will need to keep track of many important documents. This includes documents such as:
- Articles of Incorporation
- Tax forms
- Nonprofit bylaws
- Meeting minutes
We recommend starting a dedicated corporate records book early so that as you start receiving these critical legal documents, they can be kept organized from the very beginning.
While you can keep track of everything using supplies from any office store, it may be easier to use a pre-assembled kit that has the things you need in one place. Blumberg and Bindertek have some options specifically designed to meet the needs of nonprofit corporations.
How to Apply for Tax Exemptions
Applying for Exemption from Federal Taxes - 501(c)(3) Status
Your nonprofit organization must apply to be exempt from federal taxes.
Your 501c3 determination letter from the IRS will allow your organization to be exempt from Kentucky corporate income taxes.
Before your nonprofit can apply for 501(c)(3) status it must:
- File the Articles of Incorporation with the required provisions
- Adopt the bylaws and the conflict of interest policy
- Have an EIN number
There are two exceptions:
- If your organization’s annual gross receipts are below $50,000 then you may be able to file Form 1023-EZ (fee: $275). Check your eligibility here.
- If your organization is a religious institution or has annual gross receipts in each taxable year of no more than $5,000 you may be considered tax-exempt without filing Form 1023. Religious institutions and organizations with gross receipts under $5,000 can still choose to file Form 1023. This would give them a determination letter that specifies that contributions to the organization are tax-deductible.
Nonprofit Tax FAQ
When should an organization apply for federal tax exemption?
Form 1023/1023-EZ must be filed within 27 months from the end of the first month your organization was created.
How long will it take for the IRS to process Form 1023/1023-EZ?
Soon after sending your application you should receive an acknowledgment of receipt of your application.
If your application is simple and complete, IRS will send your determination letter within:
- 90 days for Form 1023-EZ
- 180 days for Form 1023
If you have not heard from them by that time you can call 877-829-5500 to enquire about your application.
Applying for Exemption from State Taxes
If you have received your Letter of Determination from the IRS, submit a copy of that letter to the Kentucky Department of Revenue to be exempt from state taxes.
Kentucky Department of Revenue
200 Fair Oaks Lane
Frankfort, KY 40602
Information: (502) 564-8139
If you would like to apply to be exempt from sales taxes, you can use Form 51A125.
Protect Your Nonprofit
Get Business Insurance
As with any other business, there may be risks involved in running the nonprofit. Getting insurance for your nonprofit allows you to focus on your passion while minimizing your liability.
Here are some of the common types of insurance you may want to consider for your organization:
- General Liability Coverage
- Directors and Officers Coverage
- Social Service Professional Coverage
Your coverage needs will vary based on your organization and the work you do.
Properly Sign Legal Documents
There will be times when you will be signing a document on behalf of your nonprofit. It is important that these times are easily distinguishable from when you are signing a document as an individual. If a document isn’t properly signed, you might suddenly find yourself personally responsible for something the organization should have been liable for.
To avoid such confusion we recommend you and all the members of your organization follow the following format:
- The official name of your nonprofit
- Your signature
- Your full legal name
- Your position in the organization
How To Keep Your Nonprofit Compliant
Determine Texas Business Permits And Licenses
Business licenses in the state of Kentucky are regulated by individual counties and cities. Contact your local authorities to find the requirements for your organization in your area.
Most nonprofits in Kentucky that will be collecting donations for a cause will need to register as a charity with the Kentucky Attorney General. The exceptions are religious organizations, educational institutions and PTA groups.
To register you will need to send to the Attorney General
- Copy of the IRS determination letter
- Copy of bylaws and articles of incorporation
- Copy of most recent Form 990
Office of the Attorney General
1024 Capital Center Drive, Suite 200
Frankfort, KY 40601
Attn: Charity Registration
Phone: (502) 696-5300
You can learn more about registering with the Kentucky Attorney General here.
If your nonprofit is not a 501(c) exempt organization then you will also need to complete and file a Unified Registration Statement (URS).
If your nonprofit will be holding bingos, raffles or other charitable games then your organization must first register with the Kentucky Public Protection Cabinet - Department of Cartigable Gaming using form CG-1.
All Kentucky nonprofit corporations must file an annual report each year with the Kentucky Secretary of State so the the information on file about your organization is kept up to date. You can fileonline or by mail, due between January 1st and June 30th of each year. There is a filing fee of $15.00
Secretary of State
700 Capital Ave.
P.O. Box 718
Frankfort, KY 40602-0718
Information: (502) 564-3490
Web Site: www.sos.ky.gov
If your organization will have employees you must register with the Kentucky Department of Taxation and the Kentucky Office of Employment and Training.
You can register with the Kentucky Department of Taxation online for an employer withholding account or contact them at:
Kentucky Department of Revenue
P.O. Box 299, Station 20
Frankfort, KY 40602-0299
Information: (502) 564-3306
Fax: (502) 227-0772
You can refer to the Kentucky Instructions for Employers for additional information.
To register with the Kentucky Office of Employment and Training you must contact them for form UI-1s at:
Kentucky Office of Employment & Training
275 East Main Street 2nd Floor
Frankfort, Kentucky 40601
Information: (502) 564-2272
Public Inspection Rules for 501(c)(3) Organizations
Organizations that have been granted the 501(c)(3) status are required to disclose the following documents to the public when requested:
- Annual returns for 3 years after the due date (this includes returns like Form 990, 990-EZ, 990-PF, and any Forms 990-T)
- All Form 990 Schedules (except portions of Schedule B), attachments and supporting documents.
- Application of exemption and all supporting documents such as Form 1023
- The official paperwork from the IRS that shows that your organization has tax-exempt status.
The following do NOT need to be shared with the public
- Portions of schedule B of Form 990/990-EZ that identify the contributors. ( You only need to disclose the amount contributed and the nature of the contributions)
- Any unfavorable rulings such as an earlier denial of tax-exempt status.
- Any information the IRS has said you can withhold. This may include things like sensitive patents and trade secrets.
Annual Returns for Tax-Exempt Organizations
Most tax-exempt nonprofit organizations are required to file an annual return with the IRS (Click here for a list of exceptions).
Which form you should use to file the annual returns depend on the annual gross receipt amounts for your organization.
‘Gross receipt’ is defined by the IRS as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses”
For any questions you can call:
- (800) 829-3676 (Form related questions)
- (800) 829-1040 (general information)
When is form 990 due?
You have a little over 4 months after your taxable year comes to an end to file Form 990. It is due on the 15th day of the 5th month. So if your taxable year ends on Dec 31st, your form 990 is due on May 15th.
NOTE: If your organization fails to file form 990 for 3 consecutive years, it will automatically lose its tax-exempt status.
Report Unrelated Business Income
If your organization has a gross income of >$1000 from a trade or business that is not related to the stated purpose of the organization, then it must file Form 990-T to pay tax on that income.
If you expect to pay $500 or more for the year in taxes on unrelated business income, your organization must pay a quarterly estimated tax on the unrelated business income using Form 990-W.