Step 1) Verify & Secure Brand Name
Your first step to forming a rock solid nonprofit organization is to verify and secure its name. Now, there are a number of rules, but let's go right to the statutes: 47-22-7. "The corporate name shall not contain any word or phrase which indicates or implies that it is organized for any purpose other than one or more of the purposes contained in its articles of incorporation."
Bookmark the entire Chapter 47-22 as well so you can get all the particulars to save time. Also, be sure to conduct a Business Entity Search through the state to streamline your research into potential naming conflicts. If needed, file an Application for Reservation of Name to protect it for 120 days or until you file.
Filing Fee: $25
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 GoDaddy 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
Your registered agent will be a legal representative of your nonprofit, but not in a lawyer or attorney-sense. It’s their job to officially receive/process critical documents like state filings, legal notices, tax forms, and so forth.
This is why they have to be either a SD resident individual/citizen or a legally registered business entity with a street address and be reliable during all regular business days/hours.
For most the two options they confront are either a) hiring an outside 3rd party which can cost upwards of $160/yr, or they get cheaper rates or deals through providers. For example, when you incorporate with Incfile they provide a registered agent for free for the first year.
Step 3) Select Incorporators & Directors
South Dakota requires your nonprofit have at least 3 initial incorporators who among other things are responsible for filing the Articles of Incorporation with the state in Step 5. You’ll also need to select at least 3 initial Directors who will oversee the nonprofit until your first meeting in Step 7 where official Directors can be voted in.
Because this part can get complex thanks to the legal/tax/corporate natures of nonprofits, if possible it’s a good idea to either hire the best nonprofit lawyer you can afford or partner with professional incorporation services who can provide expert assistance to see it’s done right and you fully understand what’s going on in terms of incorporators and directors of your board.
Step 4) Draft Nonprofit Bylaws
Incorporated nonprofits need to have bylaws, or rules, that first and foremost determine how it’s governed. They also state the mission of the nonprofit and steer it’s course. They are essential. Common bylaws touch on topics like:
- How meetings are to be conducted.
- How new officers and directors are elected.
- How voting takes place, disputes handled, and records kept/managed.
- Adding/Amending bylaws (any changes must be reported to the IRS after incorporation).
- How to handle other nonprofit organization formalities in the state of South Dakota.
If this is all new to you, use a savvy Corporate Bylaws Template which you can customize for your nonprofit and get an idea of the paperwork-side of bylaws.
Step 5) File Articles Of Incorporation
Once you and your team decide it’s time to form and fully incorporate in the eyes of the law/public record, file your nonprofit Articles of Incorporation with the Sec. of State either through mail or online. Information you’ll need includes:
- The name, type, duration of existence, and statement of purpose (provisions for nonprofit vs corp);
- Complete names & addresses of registered agent (and office), 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.
Filing Fee: $30
Step 6) Set-Up A Corporate Records Book
If you’re audited, a corporate or nonprofit records book/binder is what you’ll need to show them. In fact, if there are any kind of disputes it is the records book which should contain documents covering the matter either through contracts, bylaws, minutes of meeting, tax forms, legal notices, and so on.
As the name of the book implies, it’s a record holder of your SD registration, licenses and permits, and other critical paperwork. They’re very common in conjunction with modern “cloud-based” storage. You can pick one up at nearby office supply stores, online through Amazon, or for $99 get a professional Corporate Kit which you can brand and customize.
Step 7) Conduct Initial Meeting
Also called the organizational meeting, the first meeting of the board of directors marks the beginning of your South Dakota nonprofit. In this meeting, you must decide on the following agenda:
- Nonprofit bylaws approval,
- Designation of officers,
- Nonprofit accounting and tax period and,
- Approval of initial transactions and application of a corporate bank account.
Make sure that you prepare the minutes of the meeting; your board of directors should also sign it. For safekeeping, it should be kept in your Corporate Records Books.
Step 8) Get An EIN
An EIN is an Employer Identification Number and your nonprofit organization will need one to be compliant on the federal as well as state levels whether you intend on hiring official employees or not. Why? Well, through this number relevant agencies track your financials through your bank account which you need an EIN to create.
Now, while there are a number of ways to get one, the quickest and easiest way is to apply/request one directly through the IRS Website.