How to Form a Nonprofit in North Carolina

Two people forming a nonprofit in North Carolina

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OVERVIEW

To form a nonprofit corporation in North Carolina, follow the steps below. It is also advisable for your North Carolina nonprofit to obtain a 501(C)(3) status from the IRS, as this will enable federal tax exemption for your North Carolina nonprofit corporation. Learn more about 501(c)(3) nonprofits here.

To start a 501(c)(3) nonprofit corporation in North Carolina you must:

  1. Form a nonprofit corporation according to the rules of the state
  2. Apply for 501(c)(3) tax-exempt status with the IRS

You will need the following documents:

  • Form N-01: Articles of Incorporation for Nonprofit (Form)
  • Bylaws and Conflict of Interest Policy (Instructions) (Templates)
  • Solicitation License (Instructions)
  • Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Machinery and Equipment Tax (Form)
  • IRS Form SS-4: EIN Application (Instructions) (Form)
  • IRS Form 1023: 501(c) Application (Instructions) (Form)

In addition, most 501(c)(3) charities in North Carolina will also want to apply for state tax exemptions using the North Carolina Application for Exemption.

Forming a nonprofit in North Carolina is easy, just follow these 4 steps:

Step 1: Name Your North Carolina 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 North Carolina.

To learn more, read our How to Name a Nonprofit in North Carolina guide.

Nonprofit Naming Guidelines

According to the North Carolina Secretary of State, the name of you pick for your organization should adhere to the following guidelines:

  • An entity name shall not contain language stating or implying that the entity is organized for any purpose other than a purpose that is lawful and that is permitted by its formation documents. (i.e., Articles of Incorporation).
  • The name must be distinguishable upon the records of the secretary of state from the name of any other entity on the business registry. By Administrative Code, the business entity suffix of the name (i.e., inc., LLC) is not used to determine distinguishability on the records.
  • An entity name shall not contain words offensive to accepted standards of decency.
  • Your nonprofit’s name need not include an organizational designation, such as “Inc.”, “Ltd.”, “Incorporated”, or “Company”

You can read the Secretary of State's official guidelines for the complete rules on naming a North Carolina-based organization.

Is the Name Available?

The name of your nonprofit must be distinct from that of any other corporation in North Carolina. Use the Business Entity Search to make sure the name you have selected has not already been taken.

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.

Find a Domain Now

Service provided by GoDaddy.com

After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

Step 2: Appoint A North Carolina Registered Agent

A nonprofit corporation in North Carolina is required to have a registered agent with a North Carolina 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 North Carolina or a corporation, such as a registered agent service, authorized to transact business in North Carolina. 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. 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 North Carolina MUST at least 3 directors not related to each other.

NOTE: One person can hold 2 or more offices

To learn more, read our guide on how to select board members for your nonprofit.

Step 4: File The North Carolina Articles of Incorporation

To become a nonprofit corporation in North Carolina you must file N-01, the Articles of Incorporation for nonprofit.

Here are the sections that you will need to complete.

Section 1: Name
Enter the name you selected in Step 1.

Section 2: Exempt Status
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:

  • Charitable
  • Religious
  • Scientific
  • Literary
  • Testing for public safety
  • Fostering national/international amateur sports competition
  • Preventing cruelty to animals/children

and that in the event your organization is dissolved, the assets of the organization will be used towards tax-exempt purposes.

NOTE: You can read the IRS guidelines here.

Section 3: Registered Agent
The registered agent can be any entity registered to do business in North Carolina or any person who is a resident of the state.

Any person you designate as the registered agent must have already explicitly consented to act as the registered agent for your organization even though you do not need to include proof of consent with your NA-01.

Enter the information of the registered agent you selected in Step 2.

Section 4: Registered Office
The registered office is the physical address in North Carolina where your registered agent can be reached during regular business hours. This CANNOT be a P.O. Box; it must be a street address.

Section 5: Incorporators
Enter the name and address of at least one incorporator. This person will be in charge of signing the Articles of Incorporation on the nonprofit’s behalf.

Section 6: Membership
Select the appropriate box depending on whether or not your nonprofit corporation plans to have members.

Section 7: Dissolution
For this section, you need to attach a document that details how the nonprofit’s assets will be distributed in case the organization is dissolved. If you plan to file for 501(c)(3) status, you must include IRS-specific language. See form N-14 or this sample document for sample provisions.

Section 8: Supplemental Provisions
This section is optional.

Section 9: Principal Office Location
In this section, you must provide the physical street address and phone number of the nonprofit’s physical office location. If there will be a separate mailing address for the nonprofit, you can enter that information in this section too.

Section 10: Listing of Officers
Although it isn’t required, you may want to include the name, address, and title of your nonprofit’s officers.

Section 11: Email
Although it isn’t required, you may want to include an email address for your business. This information won’t be made public, but will be used by the Secretary of State to confirm receipt of your form and to protect against fraudulent filings.

Section 12: Effective Date
This section allows you to determine the date on which your nonprofit corporation officially forms.

Option A = your organization will officially form on the day the Secretary of State files your certificate of formation. Leave this section blank if you want to choose Option A.

Option B = you select the date of formation (it can be any day up to 90 days after filing).

Section 13: Execution
When you sign and date the form you are affirming everything written in the form.

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There are 3 ways to submit your Articles of Incorporation for Nonprofit: online, by mail, or in-person.

The filing fee of $60 may be paid in two ways:

  • Personal checks made out to NC Secretary of State
  • Credit Card - if you file online. This method will incur a $2 convenience fee.

You can upload your Articles of Incorporation for Nonprofit through the Secretary of State’s online portal.

Submit the Articles of Incorporation for Nonprofit form to the mailing address found below:

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Business Registration Division
P.O. Box 29622
Raleigh, NC 27262-0622

You may submit the Articles of Incorporation for Nonprofit form in-person to the office address found below:

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Business Registration Division
2 South Salisbury Street
Raleigh, NC 27601

Available Hours: 8am-5pm (excluding weekends and holidays).

Nonprofit Formation FAQ

How long does it take to process Form N-01?

It typically takes 1-2 weeks to process your filing. Contact the Secretary of State if you need to expedite your filing.

How do I contact the Secretary of State?

You can call for information at (919) 814-5400 or visit them at their website.

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 (Step 4), you can 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.

Since you are operating in North Carolina, you will also want to file for your North Carolina State Tax Account. To do this, you need to file form NC-BR with the North Carolina Department of Revenue. This form can be submitted via mail or online.

Open A Business Bank Account

You will typically need to take with you the following items to open a bank account for your nonprofit:

  1. The EIN for the nonprofit
  2. A copy of the nonprofit’s bylaws
  3. 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:

  • The Articles of Incorporation
  • EIN
  • 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

Your nonprofit organization must apply to both

  1. the IRS to be exempt from federal taxes, and
  2. the North Carolina Department of Revenue for an exemption from state income taxes or for a refund of sales tax.

Applying for Exemption from Federal Taxes - 501(c)(3) Status

Before your nonprofit can apply for 501(c)(3) status it must:

  1. File the Articles of Formation with the required provisions (As covered in Step 4, Sections 2, 7, & 8)
  2. Adopt the bylaws and the conflict of interest policy
  3. Have an EIN number

In order to file for tax-exempt status, most organizations will need to file Form 1023 online or by mail (fee: $600).

There are two exceptions:

  1. 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.
  2. 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.

Applying for Exemption from State Taxes

Once you have received your 501(c) determination letter from the IRS, you can file for a state income tax exemption by providing a copy of the Articles of Incorporation, Bylaws, and Determination Letter to the Department of Revenue.

Typically, the Department of Revenue will send your nonprofit a letter and questionnaire after you’ve registered as a nonprofit. This questionnaire, plus the supporting documentation should be mailed back to the Department of Revenue to secure a tax-exempt status.

To file to obtain a sales tax refund fill out Form E-585 - Nonprofit and Governmental Entity Claim for Refund State, County, and Transit Sales and Use Taxes.

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.

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

Keep Your Nonprofit Compliant

Get A Registered Agent

Nonprofits that have incorporated are required to maintain a registered agent with an office address in North Carolina. If the agent or the office address changes, you must file Form NA-02 with the Secretary of State to effect a change to the articles of incorporation.

Failure to update this information may result in termination of the corporation.

File Required Periodic Reports

Annual reports are not required.

Pay Your State Franchise Tax

Every nonprofit corporation in North Carolina needs to pay a franchise tax unless the organization has received an exemption from the North Carolina Department of Revenue. State Franchise and Income Tax exemptions can be applied for at the same time.

Determine North Carolina Business Permits And Licenses

As a nonprofit in the state of North Carolina, your organization will not need a general business license, but permits will be required if you will conduct certain activities such as sell beer, etc.

If your organization will raise money by hosting charitable gambling will have to follow these rules:

Bingo

Your organization will be required to obtain a North Carolina Bingo License

Raffles

Nonprofit organizations are only permitted to conduct raffles if they follow these guidelines:

  • No more than two raffles per year.
  • The maximum cash prize is $5,000 and the maximum non-cash, non-redeemable merchandise prize is $25,000. See 1993 N.C. Sess. Laws 219 (maximum cash prize raised from $1000 to $5000 effective June 28, 1993).
  • Real property is not offered as a prize.
  • The raffle is not conducted in conjunction with bingo.
  • No less than 90% of the net proceeds from such an event can be used for charitable, religious, educational, civic or other nonprofit purposes. Net proceeds equal receipts of the event less the cost of the prizes awarded.
  • None of the net proceeds are used to pay for another person to conduct the raffle or to rent premises to sell or receive raffle tickets or to conduct the raffle. N.C.G.S. 14-309.15 (1986).

Fundraising

The state of North Carolina has very specific rules regarding charitable fundraising. Unless your organization is exempted under G.S. 131F-3, your organization will be required to obtain a license to solicit contributions within the state of North Carolina.

Refer to the North Carolina Department of the Secretary of State Charitable Solicitation Licensing document for full details.

Employees

If your organization will have employees you must register with the North Carolina Department of Revenue.

You can easily apply online, fill out the NC-BR, or find the contact information for your local department of revenue here.

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.

Documentation FAQ:

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).

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 gross receipts < $50,000 --- File 990-N
  • Gross receipts <$200,000 and total assets <$500,000 --- File 990-EZ
  • Gross receipts > $200,000 or Total assets > $500,00 --- File 990

For any questions, you can call the IRS at

  1. (800) 829-3676 (Form-related questions)
  2. (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.

State of North Carolina Nonprofit Quicklinks