How to Start a Nonprofit in Arizona: A Complete Guide
Forming a nonprofit involves more than simply filing a 501c3 application. Every state has its own rules, regulations, and requirements surrounding the process of registering your nonprofit, and the state of Arizona is no exception. From the fun stuff like choosing a name, to laws and litigation, this comprehensive guide takes you through everything you need to know. If you are so much as thinking about starting a nonprofit in the state of Arizona, this guide can help bring about a stress-free and successful launch!
- How to Start a 501c3 in Arizona
- The Fun Stuff
- Administrative Obligations
- Preparing Your Arizona Nonprofit Articles of Incorporation
- Applying for Tax Exemptions
- Arizona Business Licenses
- Final Thoughts
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How to Start a 501c3 in Arizona
Forming a nonprofit organization can vary state by state. How to start a nonprofit in New Jersey will be a slightly different experience than how to start a nonprofit in Illinois. While a lot of the main requirements are the same across the board, there can be some differences. Before applying for 501c3 status, you must form a nonprofit corporation under Arizona state law, so it is imperative to understand exactly what is required by these laws.
We will break down all the specifics required in Arizona throughout this article, but please pay special attention to the section on the Arizona Articles of Incorporation, as there are some extra steps required by this state.
Eva is ready to dive in to starting an Arizona nonprofit!
Another important thing to keep in mind is that your annual financial reporting is not only due to the IRS, but also to the Arizona Corporation Commission.
You can visit these links to find more information on how to start a nonprofit in Indiana, and how to start a nonprofit in Colorado.
The Fun Stuff
There are a lot of hoops to jump through to get your nonprofit off the ground–so why not start with some of the more fun and creative requirements?
Choose Your Directors
The first corporate meeting of a nonprofit is typically called the organizational meeting of the board. This is where you will choose your initial board of directors, set up your accounting period and tax year, approve bylaws, and approve of any initial transactions for your corporation. You will also set up officer titles, and agree on a purpose for your organization–which should be put down in writing. Minutes should also be taken and filed with all other documentation.
In Arizona, you are required to have at least one director for your nonprofit organization.
Decide on a Name
When choosing a name for your nonprofit corporation, you need to check first with the Arizona Corporation Commission to ensure that your name is distinguishable from other corporate names in the state.
The Arizona Corporation Commission has a business name database on their website that you can use to check for availability. If your name is in the clear, you can reserve that name for 120 days by completing an Application to Reserve Limited Liability Company Name with the Arizona Corporation Commission. This can be filed online, or printed and sent through the mail. Online filing fee is $45, while filing through the mail costs $10. (The extra $35 is a fee to expedite the process).
Appoint an Agent
To form a nonprofit organization in the state of Arizona, you must appoint an agent for service of process. This individual or corporation needs to have a physical address in Arizona, and must agree to accept legal papers on behalf of the organization if sued. Typically small nonprofits will name an officer or director to be the initial agent.
When starting an Arizona nonprofit corporation, you will need to have a number of documents filed, either with government organizations or within your own nonprofit records. Here is a list of the necessary requirements for administrative obligations due before filing for 501c3 status in Arizona.
Prepare Your Nonprofit Bylaws
Before any paperwork can be filed, your organization will need to prepare bylaws that are compliant with Arizona law. Bylaws are essentially the operation manual of your nonprofit–you will need to outline procedures for board meetings, electing directors and officers, and any other corporate formalities. Some common provisions for your bylaws include:
The name and purpose of your nonprofit organization
Roles and terms of board members and officers, and election procedure
Categories and responsibilities of members
Structure of the board
The role of your executive director
Indemnification and compensation of board members
Dissolution clause (more about this in the articles of incorporation section)
These bylaws should be filed with your nonprofit records. It is not necessary to file them with the state. But remember that these are legal documents that are required, and it is a best practice to get help from a qualified professional with knowledge in the nonprofit arena.
Pro Tip: Even though your bylaws should not change after they have been accepted by the IRS, your nonprofit should review its bylaws every couple of years to ensure that your annual reporting information is accurate. And of course if there is any structural change to your nonprofit in the future, it will be necessary to review the bylaws at that time.
Apply for Federal Employer Identification Number
Before filing for tax exempt status with the IRS, you will need to obtain a Federal Employer Identification Number or EIN. This can be done by completing an application on the IRS website, and there is no filing fee.
Emily is thinking through the administrative obligations for her new nonprofit.
One of the most important administrative obligations for a nonprofit is filing an annual report of your finances. You must file with both the IRS (Form 990 or 990-N), and with the Arizona Corporation Commission. These reports are due yearly by the date of your organization’s formation. Filing with the ACC can be done online or through postal mail and requires a filing fee of $10.
Preparing Your Arizona Nonprofit Articles of Incorporation
To establish your nonprofit organization in the state of Arizona, you must file your articles of incorporation with the Arizona Corporation Commission. The following information must be included in these articles:
The name of your nonprofit
Whether or not your nonprofit will have members
The business address of your nonprofit (if different than that of your statutory agent)
"Character of affairs" that your nonprofit intends to conduct in the state of Arizona
Name and business address of each director and each incorporator
Name and physical address of your statutory agent
There are also some specific language requirements to use to obtain tax exempt status for the IRS, including:
Nonprofit statement of purpose (check the IRS website for language requirements)
Dissolution clause that pledges nonprofit assets to either the government or another 501c3 upon its dissolution
A statement that your nonprofit organization will not engage in activities that are unrelated to its purpose, or prohibited legislative or political activities.
You can find a form on the Arizona Corporation Commission website that offers the minimum required to create a nonprofit in Arizona. You can use this form as a guide, but do not use it to file as it does not include the IRS requirements, or space to add them.
When you have completed your own articles, using the form as a guide and adding the IRS requirements as three separate clauses, you can file a copy to Arizona Corporation Commission via their online portal. You may also choose to file through postal mail. Either way the filing fee is $60.
The state of Arizona also requires that you file a Form M002 Statutory Agent Acceptance and a Certificate of Disclosure along with your articles of incorporation. You can do this online via the Corporation Commission.
Publishing Your Notice of Incorporation in Arizona
One additional step is required for your articles in the state of Arizona. You must publish a Notice of Incorporation three times in a local newspaper where your LLC is established, within 60 days after filing your articles with the Corporation Commission. You will receive instruction on how to do this in your approval letter. The only two counties exempt from this requirement are Pima and Maricopa, if your LLC is located in either of these municipalities you will publish your articles on the Arizona Corporation Commission website.
Pro Tip: When forming your nonprofit corporation and filing for tax exemption, it is a best practice to hire an attorney who is familiar with nonprofit tax law. This process is arduous, and can become extremely involved, with a lot of legal documentation. Very few founders and/or boards are prepared to handle this without any assistance. It is not easy to obtain and hold onto tax exempt status, so do not go it alone unless you are an expert yourself.
Applying for Tax Exemptions
Once you have formed your nonprofit corporation under the Arizona laws, it is time to file for tax exempt status through the appropriate federal, state, and municipal channels.
Form 1023 Federal Tax Exemptions
When filing for tax exempt status through the federal government, you will be required to fill out and submit IRS Form 1023, Application for Recognition of Exemption Under Section 501c3 of the Internal Revenue Code. This involved and complex form will require a great deal of information about the nonprofit incorporation including operations and activities, history, finances, governance, and organizational structure. The filing fee for Form 1023 is $600.
If your new nonprofit is a small organization, you may be eligible to file IRS Form 1023-EZ. This is a truncated and simpler version of Form 1023. It is cheaper, easier to fill out, and is processed by the IRS in about half the time of the traditional 1023. It is also worth noting that the 1023-EZ can be filled out electronically. However, to be eligible to file this form your nonprofit must have total assets valued under $250,000 and must have projected annual gross receipts under $50,000. The filing fee for Form 1023-EZ is $275.
Arizona State Tax Exemptions
By receiving 501c3 status from the IRS, your Arizona nonprofit should automatically be exempt from state income tax. To obtain exempt status from both state use and sales taxes, you may have to file an application with the Arizona Department of Revenue.
Arizona Business Licenses
You may need to obtain local or state business licenses or permits, depending on the type of activities your nonprofit intends to engage in, and where it is located within the state. To determine whether you will require local licenses, check in with the clerk of the municipality where your business offices are located. The Arizona Department of Commerce Licensing Guide can direct you toward any state licenses you may need.
Pro Tip: It is worth noting that Arizona repealed its charitable solicitation registration laws in 2013, meaning that nonprofits are no longer required to register to solicit or fundraise in the state. However, Arizona nonprofits that solicit or receive donations in other states may have filing and reporting obligations in those states.
Important Documents and Resources
To guide your nonprofit journey, be sure to have a knowledge of the most important documents to file. We will list them here for easy reference, as well as the websites you can visit for regulations, information, and to obtain the forms themselves.
Anthony is taking note of all these important resources!
Documents Required for Nonprofit Formation
IRS Form 1023. You will file this document with the IRS to obtain tax exempt status for your nonprofit. Filing fee is $600.
IRS Form 1023-EZ. This short form version of the 1023 is available only to small nonprofits (less than $250,000 in assets and less than $50,000 in projected annual gross receipts). Filing fee is $275.
IRS Form 990. Your nonprofit will use this form for annual reporting to the IRS.
EIN (Employer Identification Number). This number is issued by the IRS to differentiate your corporation from all others.
Application to Reserve LLC Name. This application is available through the Arizona Corporation Commission and will reserve your original nonprofit name for 120 days.
Form M002. This must be filed along with your articles of incorporation and proves acceptance of your nonprofit statutory agent.
Websites to Visit for More Information
IRS.gov. The official IRS website has guidelines, regulations, and forms available for obtaining tax exempt status for your nonprofit.
AZCC.gov. The Arizona Corporation Commission is your go-to for finding all the information needed to create your nonprofit corporation in the state of Arizona.
Launching a new nonprofit organization can be challenging, but ultimately extremely rewarding. Do not be discouraged by the amount of documentation required by local, state, and federal governments. Take the process step by step, and you will find that it is not as intimidating as it seems. This goes for an Arizona 501c3, a Texas 501c3, a Florida 501c3, a Michigan 501c3, or an Ohio 501c3.
That being said, also be sure to hire a tax attorney who is familiar with nonprofit tax law to help you along the way. This can seem like a big expense for most nonprofits just starting out, but it pays off in the end. Do not try to take on all of the legal documentation on your own unless you are already an expert. By getting assistance from the appropriate quarters and moving with deliberation, it will not be long until your nonprofit is out there promoting your mission to the world.
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💡How much does it cost to start a nonprofit in Arizona?
This answer can vary according to a number of circumstances. The size, the number of people involved, and the fee of your attorney. Actual filing fees can run anywhere from just over a few hundred dollars to around a thousand dollars. Find out more.
🔑 How do you start a 501c3 in Arizona?
First you have to create a corporation according to the rules and regulations of the state. Be careful that you are also taking IRS guidelines into consideration to remain in compliance with federal requirements. When you have formed your corporation, you may then apply for 501c3 status with the IRS via Form 1023 or Form 1023-EZ (if eligible). Find out more.
📝 How do you prepare your Arizona nonprofit articles of incorporation?
The easiest way is to download the articles of incorporation application from the ACC website. Use this as a guideline to craft your own articles. The IRS will require three additional clauses that you can then add on. These include a Statement of Purpose, A Statement against illegal activities, and a Dissolution Clause. Find out more.