how-to-start-a-nonprofit-in-indiana

10-Step Guide on How to Start a Nonprofit in Indiana

Trish

Forming a nonprofit in Indiana requires more than filing a 501c3 application. When it comes to starting a nonprofit organization, the criteria and regulations vary from state to state, making realizing your dream a bit of a complicated process. Luckily, you do not need to feel overwhelmed. Here are 10 simple steps you can trust and follow to make the launch of your nonprofit a success in the state of Indiana!

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What to Know Before Starting a 501c3 in Indiana

While Indiana law poses a lot of the same requirements as other states regarding creating a 501c3 nonprofit, there are a few regulations that are unique. We will list them here, and then go into greater detail about each one throughout this guide. 

  • A nonprofit corporation in Indiana must have at least 3 directors.

  • There is specific descriptive wording you must use in your Indiana articles of incorporation.

  • While there is no need to register your nonprofit with the state to start your fundraising activities, you may have to register it with other states if you are planning to solicit donations outside of Indiana.

Not in Indiana? No worries! Find out how to start a nonprofit in: 

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How to Start Your Indiana Nonprofit in 10 Steps

There are a lot of things you need to accomplish to get your nonprofit off the ground. We will simplify matters by breaking down the process into simple steps you can easily follow. 

Step #1: Name Your Organization

This is both a fun and important part of creating your nonprofit. A name informs the public, and a great one can really boost your fundraising and marketing power. This is your brand and it can explain your mission in just a few simple words. When choosing a name for your corporation in the state of Indiana, you need to make sure that it has not already been taken by any other corporation on file, and that it is distinguishable from (that is, not too alike) other businesses. You can do so by searching your desired name on the Indiana Name Database found on the Indiana Secretary of State website. 

One other thing to know about naming your nonprofit in Indiana - you are required to incorporate one of the following terms in your name: incorporated, corporation, limited, company, or an abbreviation of either of those. 

Step #2: Recruit Your Directors

Before you hold any meetings or make any big decisions, you want to choose incorporators and initial directors, who will form the governing body of your organization. An incorporator is someone who signs off on your articles of incorporation - you need at least one, but you can have more. Directors are individuals who handle overseeing the large-scale operations of your nonprofit. You will need at least three directors in the state of Indiana. 

Indiana nonprofits require that you have a president, a secretary, and a treasure in the least. An individual may hold two or more offices. 

Step #3: Appoint a Registered Agent

Your nonprofit registered agent is an individual or corporation that agrees to accept legal documents if your corporation is ever sued. They must agree to the position, and have a mailing address in the state of Indiana. 

Step #4: Adopt Bylaws and Conflict of Interest Policy

Now it is time to draft bylaws. The bylaws of your nonprofit are essentially the operating manual for your organization. They outline things like meeting procedure, director and officer elections, and other corporate formalities. You are not required to file bylaws with the state, but they are essential to the health and stability of your nonprofit. 

A conflict of interest policy is another important document for your organization. It goes over in detail the procedures in place if conflict or potential conflict arises in the company. Due to their tax exempt status, there is oversight from the IRS, as well as a lot of public scrutiny for nonprofit organizations. You need to demonstrate that your nonprofit understands potential conflicts of interests and has a plan to address them should they occur. 

Step #5: Submit Articles of Incorporation

The incorporation of your organization is a big step; there are a few important things you must know. Your articles of incorporation can be created with a fillable form available on the Indiana Secretary of State’s website. These can then be mailed or filed online, for a $50 fee. The instructions you must follow to complete the form are also available on this site. 

There are some essential things that must be included in your articles for the state of Indiana. These include:

  • The street address of your nonprofit offices

  • The name and address of each of your incorporators

  • The name and address of your registered agent

  • The following statement: "This corporation is a public benefit corporation"

  • Whether or not the corporation will have members

The following clauses must be added to comply with IRS regulations: 

  • Statement of purpose (that uses the appropriate IRS language, see below)

  • A dissolution statement that dedicates your nonprofit assets to another 501c3 upon dissolution

  • A statement that your organization will not participate in prohibited legislative or political activities

The IRS has specific rules as to the sort of language that must be used in drafting your articles of incorporation for federal tax exempt status. To find out more about what is required, you can check out IRS Publication 557, available on the IRS website. 

The filing fee for your nonprofit Articles of Incorporation is $30 if sent through postal mail, and $50 if you are filing online (for expedited processing). 

Step #6: Obtain an Employer Identification Number (EIN)

Every corporation is required to have an employer identification number, or EIN. This is a tax identification for your organization and  you will use it to file state and federal tax returns, and other government filings, as well as provide it to your nonprofit bank. This number can be obtained by filling out a form on the IRS website, and the filing is free. 

Step #7: Establish Initial Documents and Policies

Before your business starts hiring employees and commencing operations, administrative documents and procedures should be developed. This includes creating HR policies for your employee handbook, developing reimbursement policies for your staff and volunteers, developing accounting policies, securing your general and executive liability insurance, and ensuring you have all of the required business licenses/documents to establish your business.  

For instance, there are 4 essential financial statements you must make: a statement of cash flows, an income statement, a balance sheet, and a statement of functional expenses. You must institute each of these documents before starting your nonprofit because some of the information they pose is crucial to ongoing financial compliance.

As another example, consider the importance of formulating guidelines to list in your employee handbook before you begin operations: you set the tone for how you want your employees to behave in the workplace, so everyone knows where they stand from the get-go and you can reference such policies early on in the establishment of your nonprofit if an individual appears to violate them. For legal reasons, developing an employee handbook is paramount! 

After securing the above-mentioned items, you will be ready to officially launch your 501c3.

Step #8: Hold Initial Directors Meeting 

Often known as the Organizational Meeting of the board, this initial meeting allows you to take some important first steps in the set up of your nonprofit, including:

  • Appointing officers

  • Approving required bylaws

  • Setting up your nonprofit accounting period and tax year

  • Approving all initial corporate transactions

At the close of the meeting, your secretary should create and file the meeting minutes. This, along with all other important documentation (bylaws, articles of incorporations) should be saved in a corporate records binder. 

Pro Tip: Your nonprofit should have physical copies of all documents, but also upload digital copies and have them stored in a secure location. These documents will be needed for audits, applications for grants and other services like insurance, so they should always be accessible. 

Step #9: Apply for Tax Exemptions

Now that your nonprofit is incorporated and your board in place, it is time to apply for both federal and state tax exemption. 

Federal exempt status is obtained through the IRS by filing Form 1023, Application for Recognition of Exemption Under Section 501c3 of the Internal Revenue Code. This form is both long and involved - depending on the size and complexity of your nonprofit, you could be looking at filing between 50 and 100 pages of information. The filing fee for Form 1023 is $600. 

Smaller nonprofits may be eligible for filing the short-form version of the 1023: Form 1023-EZ. To qualify the organization may not have over $250,000 in assets, and have less than $50,000 in annual gross receipts. While Form 1023-EZ is far simpler to file, it is also somewhat controversial. Many states oppose its use, and some nonprofit advocacy groups are concerned that using the 1023-EZ can negatively affect grant funding for the small nonprofits that file it. 

Indiana tax exemptions are also available. Upon receiving tax exemption from the IRS, your nonprofit is eligible for state tax exemptions by sending a copy of your IRS Federal Determination letter to the Indiana Department of Revenue. If you want to gain sales tax exemption, your nonprofit needs to file Form NP-20A Nonprofit Application for Sales Exemption with the IDR. 

An Indiana nonprofit is not required to register with the state before performing fundraising activities. However, your nonprofit may have to register in other states if soliciting for out of state funds. 

Annual Reporting

As a 501c3 organization, you are required to file some form of the Form 990 with the IRS every year. This report includes not only your financial reporting for the year, but also your accomplishments and fundraising activities, details on large donors, as well as key information about operations and company structure (like what assets you have in your bank). Obviously there are no taxes due with this report, but it is used as an accountability tool for your nonprofit organization. 

Failure to submit timely annual reports can result in penalties up to and including loss of your organization’s nonprofit status. 

Pro Tip: When it comes to both filing for tax exemption as well as annual reporting, it is highly recommended that your organization work with a tax professional who has experience working with nonprofits. If you do not have someone on staff with this kind of experience, then hire a consultant to do the job for you. These forms are extremely involved, and require very specific language. Not to mention the fact that tax rules and regulations are continually changing. It is not worth risking your tax exemption status to save a few dollars - hire a nonprofit tax lawyer or accountant!

Step #10: Obtain Necessary Licenses and Permits

While the state of Indiana does not require your nonprofit to obtain statewide business licenses, you may need to get one or more local permits, depending on your location and what type of services your organization is involved in. Therefore be sure to talk to your municipal licensing divisions to find out whether there are any requirements for your nonprofit. 

Finally, you will need to file a document called the Business Entity Report every other year with the Indiana Secretary of State’s Business Services Division. This report is initially due no more than a month after the anniversary of your incorporation, then every other year thereafter. The filing fee is $20. 

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Important Websites

Here are links to a few websites that have essential information or forms for the formation of your nonprofit. 

IRS.gov. This is the official site of the IRS, and is where you will find Form 1023, Form 990, and the application for obtaining your EIN. It also has tons of helpful information including guidelines for filing all of these documents. 

Indiana Secretary of State. This site is where you can find the fillable form for your articles of incorporation, as well as the business name searchable database for Indiana. 

Indiana Department of Revenue. Visit this site to file for exemption from sales tax in Indiana, as well as to find all the information on exemptions from all forms of state tax in the state. 

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Final Thoughts

Launching a nonprofit organization in Indiana can seem a bit overwhelming at first glance. But all you really need to remember is that this process can be broken down into manageable steps. Patience and thorough research will help you to incorporate your nonprofit and then obtain your tax exempt status. 

Indiana guidelines can be just slightly different than those for starting a Texas 501c3, a Florida 501c3, a Michigan 501c3, or an Ohio 501c3. Keep these differences in mind as you move forward through the process of forming your tax-exempt organization.

Just remember that you do not have to go it alone, and that doing so is not recommended. Hire a reputable tax professional to help you with filing your Form 1023, and the filing of your annual 990 thereafter. It will give you peace of mind, and ensure that your nonprofit is compliant with all regulations. With a bit of patience and help, your nonprofit will be well on its way to becoming an established organization in the state of Indiana. 

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FAQ

💡How much does it cost to start a nonprofit in Indiana?

The amount it costs to start a nonprofit in Indiana depends on a number of factors. Filing fees can add up to anywhere from around $500 to $800 on average. But there are other costs to keep in mind, such as operations costs, and hiring a tax professional to assist in the process. Find out more. 

🔑 How many board members are required for a nonprofit in Indiana?

Your nonprofit is required to have 3 board members in the state of Indiana. Find out more. 

📝 Can you start a nonprofit alone?

Any nonprofit can be founded by one person. But you will have to get help to get it off the ground. First, you need to create a board of directors with at least 3 members. Next, you will want to get assistance from a nonprofit tax professional to file for tax exempt status. Depending on the complexity and potential size of your nonprofit, you will want to get more people on board. Find out more.  

Organization & HR
Trish
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