For-profit organizations are started with the goal of financial gains. Nonprofit corporations are started with the intent for social change.
Most nonprofit organizations apply for federal 501(c)(3) status because getting the 501(c)(3) status has many advantages such as tax exemptions, special rates on bulk mailings, and tax-deductible donations.
NOTE: A 501(c)(3) nonprofit is an organization that has been designated as a ‘nonprofit’ by the state government and as a ‘501(c)(3)’ organization at the federal level.
This guide will show you how to form a 501(c)(3) Nonprofit Public Charity in Maryland. Read our detailed guide, or if you want to get started right away, you can download the required paperwork.
To start a 501(c)(3) nonprofit corporation in Maryland you must:
Formation & Regulations
Step 1) Select and Secure Your Nonprofit's Name
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 Maryland.
1. Naming Guidelines
- The name of you pick for your organization must include: must include one of the following words or their abbreviation:
- "Company", (if it's not preceded by the word/symbol "and")
- You can read the official guidelines for the complete rules on naming a Maryland based organization.
2. Is the name available?
The name of your nonprofit must be distinct from that of any other corporation in Maryland. Use the Business Entity Search to make sure the name you have selected has not already been taken.
3. Is the website 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 Registered Agent
A nonprofit corporation in Maryland is required to have a registered agent with a Maryland 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 Maryland or a corporation, such as a registered agent service, authorized to transact business in Maryland. You may elect an individual within the company including yourself.
Incfile provides the first year of registered agent service free with nonprofit formation ($49 + State Fees)
Step 3) Select Your Board Members and Officers
The directors of a nonprofit are responsible for overseeing the operations of the organization. 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 Maryland MUST include:
- At least 3 directors not related to each other
- A president
- A secretary
- A treasurer
NOTE: One person may hold two or more officer positions, however, if a document requires signatures of two officers, it must be signed by two different people.
Step 4) File Articles of Incorporation
To become a nonprofit corporation in Maryland you must file Articles of Incorporation for a Tax-Exempt Nonstock Corporation with the Maryland State Department of Assessments and Taxation (SDAT).
Here are the sections that you will need to complete:
Enter the name and address of the incorporator(s).
The incorporator can be any person helping the nonprofit incorporate. This can be you or your attorney. The incorporator does not need to be a part of the nonprofit.
SECOND) Corporate Name
Enter the name you selected in Step 1.
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: If you are using the form provided by the state of Maryland, it already has the language required by the IRS to make your organization eligible for tax-exempt status. You will just need to add 1 or 2 sentences describing the purpose of your nonprofit.
You can read the IRS guidelines here.
FOURTH) Principal Office
Enter the Maryland street address of your organization’s principal place of business. If your organization will not have an office you can use the address of your registered agent.
FIFTH) Registered Agent & Registered Office
Enter the information of the registered agent you selected in Step 2.
SEVENTH) Supplemental Provisions/ Information
Enter the names of the directors you selected in Step 3.
When you sign and date the form you are affirming everything written in the form.
The registered agent you selected must also sign affirming that they will act as the registered agent for your organization.
The Articles of Incorporation can be filed online, by mail, or in-person:
The total filing fee of $170 may be paid by check made out to: State Department of Assessments and Taxation
State Department of Assessments and Taxation, Charter Division
301 W. Preston Street; 8th Floor
Baltimore, MD 21201-2395
The total filing fee of $170 may be paid by check made out to "State Department of Assessments and Taxation"
How long does it take to process the paperwork?
Processing typically takes 4-6 weeks.
Operating Procedures & Housekeeping
1) 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
2) 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.
3) 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 the IRS online application. This is the fastest method as you’ll get your EIN as soon as you complete the application.
NOTE: If you use a nonprofit formation service, EIN assistance might already be included in the package.
Step 4) Start 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 Certificate of Formation
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.
Step 5) 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:
- Certificate of Formation
- 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
Once your nonprofit has received the 501(c)(3) letter of determination from the IRS, that letter will also allow your organization to be exempt from paying income tax, sales tax and use tax to the state of Maryland.
Applying for Exemption from Federal Taxes (501c3 status)
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.
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
For exemption from state income tax send the following:
- A letter requesting an exemption from Maryland Income tax
- Copy of the IRS determination letter
- Copy of the bylaws
- An explanation of the purpose of your organization
- Latest financial statement of your nonprofit.
Comptroller of the Treasury
Revenue Administration Division
110 Carroll Street
Annapolis, MD 21411
Protect Your Nonprofit
Get Insurance Coverage
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 Signing 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:
- Official Name of your nonprofit
- Your Signature
- Your full legal name
- Your position in the organization
Keep Your Nonprofit Compliant
Nonprofits that have incorporated are required to maintain a registered agent with an office address in Maryland.
As a 501c3 nonprofit in the state of Maryland , your organization will not need a general business license.
If your organization will be soliciting for donations you must register with the secretary of state.
You will need to file:
- COR-92 Registration Statement
- Articles of Incorporation
- IRS 501c3 Determination Letter
Charitable Organizations Division
Office of the Secretary of State
Annapolis, MD 21401
Phone: (410) 974-5534
Web Site: www.sos.state.md.us/
Filing Fee: $0-200 (depending on revenues)
NOTE: If the organization receives less than $25,000 per year in charitable contributions, it may file the Exempt Organization FundRaising Notice form instead of submitting all forms required to complete the initial registration.
If your organization will have employees you must register with the Comptroller of Maryland.
You can easily apply online or by mail:
Comptroller of Maryland
Revenue Administration Center
110 Carroll Street
Annapolis, Maryland 21411-0001
NOTE: If your organization owns, uses or leases personal property in the state of Maryland, you will need to file Form 1 - Annual Report & Personal Property Tax Return instead.
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.
How long do I have to produce these documents if requested?
Ideally within the same day. If your organization doesn’t have an office or maintains limited hours during parts of the year, the information should be made available within two weeks.
Do I need to provide copies of the documents?
If someone asks for copies in person or in writing you must provide them with copies.
Can I charge for copies?
You can charge a reasonable amount for making copies of the documents requested.
NOTE: It may be easiest to have the documents available on your website so that anyone who requests copies can be sent to the site. This allows you to stay compliant without having to spend a lot of time dealing with document requests.
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).
The table below will help you determine which form you should file.
If filing by mail send to:
Internal Revenue Service
1160W 12th Street Ogden, UT 842201
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.
Unrelated Business Income
If your organization has income not related to the stated purpose of the organization, you must pay federal and state income taxes on that 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.
You must file Form 500 within 3.5 months after the end of the fiscal year of your organization.
Comptroller of Maryland
Revenue Administration Division
110 Carroll Street
Annapolis, MD 21411-0001
Information: (410) 260-7980
Fax: (410) 974-3299
Filing Fee: $0