how-to-start-a-nonprofit-in-new-jersey

How to Start a Nonprofit in New Jersey in 10 Simple Steps

Daniel

If only starting a nonprofit organization were as simple as filing a 501c3 application. 

What makes it even more difficult is the sheer amount of information - sometimes conflicting information - out there detailing how to do so, each of which is compounded by the fact that rules and criteria vary from state to state. Indeed, becoming a tax-exempt nonprofit involves some work, but fortunately the rewards are worth it; and when you have a solid source of advice (like Springly!) to guide you, the whole process can go far more smoothly. Here are 10 simple steps that you can trust to help you make the launch of your nonprofit a success in New Jersey!

Let’s go!

No time to read this article now? Download it for later.

how-to-start-a-nonprofit-in-new-jersey-before-starting

Before Starting a Nonprofit in New Jersey

First off, let’s discuss a few requirements that are unique to starting a nonprofit corporation in New Jersey. Before filing for federal 501c3 status, you will need to incorporate your organization on a state level (Title 15A of New Jersey Statutes). Additionally: 

  • Your nonprofit must have 3 or more directors

  • Your nonprofit must file an annual financial report with the New Jersey Division of Taxation, on top of your annual reporting with the IRS

  • Your nonprofit may have to register with the state before launching any fundraising activities, depending on both size of your organization and those activity types

For official guidelines on launching new nonprofits in the state of New Jersey, you can visit one of these sites:

NJConsumeraffairs.gov. Official website for the New Jersey Department of Consumer Affairs; they post fundraising registration requirements for nonprofits. 

BusinessNJ.gov. The New Jersey Online License and Certification website walks visitors through the rules, requirements, and guidelines for obtaining a state business license.

NJ.gov. The New Jersey Department of the Treasure, Taxation Division is where you will file your Articles of Incorporation. 

If you are looking to launch a charitable organization in another state, these links will provide you with more information on how to incorporate your nonprofit there.

how-to-start-a-nonprofit-in-new-jersey-how-to-start

How to Start a 501c3 in New Jersey

Now that you have some background information and a few resources to explore, we can get down to the nitty gritty. Here are the ten steps you need to follow to get your mission off the ground. 

Step #1: Name Your Organization

This is one of the fun parts of starting a nonprofit, but you will have to be careful when coming up with one. The name you choose cannot already be taken by another corporation or business entity in New Jersey. It cannot even be confusingly similar to one. To find out if your desired name is available, you can visit the Division of Revenue and Enterprises Service website and search their Business Name Database. In New Jersey, the name of your organization must legally include the term "incorporated", "corporation", "inc", "corp", or "a New Jersey Nonprofit Corporation". 

Step #2: Form a Governing Body

Next you must figure out how you want to structure your board of directors. This is an important step, as an able governing board is the foundation of any thriving nonprofit. The role of this entity is to make large-scale decisions, set strategic goals, formulate policy, ensure integrity of internal controls and systems, steward resources, and facilitate operations. 

In New Jersey your board must have 3 or more directors. This is the only requirement. But it behooves the future success of your nonprofit to choose board members wisely, and set up a system that will promote the financial health of your corporation. 

For the best management of your nonprofit board, you should develop the following (these are typically included in your bylaws):

  • Documented detailed job descriptions for every position

  • A recruitment process for board members

  • Orientation and continued training for each board member

  • An evaluation process

Pro Tip: Board members are usually individuals who work on a volunteer basis and are a separate entity than any paid staff that populate your nonprofit organization. 

Step #3: Choose a Legal Representative

As in many other states, New Jersey requires that your nonprofit have an agent for service of process. This individual or corporation agrees to accept legal notices on behalf of your organization if it is sued, and they must have a physical address in the state of New Jersey. Smaller nonprofits will usually appoint an officer or director as their initial agent. 

Step #4: Submit Articles of Incorporation 

A nonprofit organization is legally established in the state by filing a certificate of incorporation with New Jersey’s Department of Treasury. This documentation must include the following information:

  • Name of your nonprofit organization

  • Date of the articles

  • Purpose of your nonprofit (which must be in compliance with IRS language)

  • Duration of your organization (typically you will consider it "perpetual")

  • Business address

  • Name and street addresses of trustees (there must be three in the state of New Jersey)

  • Name and address of your nonprofit agent for service of process

  • Name and personal address of each incorporator

  • Whether your nonprofit will have members

  • Election process (this can typically be found in your bylaws)

  • Where your nonprofit will distribute assets after dissolution (must be in compliance with IRS requirements)

To complete your articles of incorporation online, visit the Online Business Formation page at the Division of Revenue. Note: the form available does not include three key pieces of information, which need to be added as clauses to conform with IRS requirements for 501c3 status. These are:

  • Statement of Purpose (see IRS website to understand the required language)

  • Dissolution Clause that promises to distribute assets to the government or another 501c3 upon nonprofit dissolution

  • A statement to refrain from activities unrelated to your nonprofit’s purpose, or prohibited legislative or political activities

You can file your articles on this site - there is no fee. In New Jersey you are not required to submit an initial report directly after filing your articles of incorporation.

Pro Tip: The template for articles of incorporation provided by the New Jersey Department of Treasury does not follow requirements for the IRS. Be sure to review the IRS rules so that you use the correct language and add the three aforementioned clauses to your articles. 

Step #5: Obtain an EIN and Open a Nonprofit Bank Account

Another important step to forming your corporation is to obtain a federal employer identification number. This identifier serves as a kind of social security number for your business; it is perpetually associated with your organization, and differentiates it from all other corporations. To get your EIN you need to fill out an online application at IRS.gov. There is no fee for this action.

Next, get your financial practices in line by opening a nonprofit bank account. Take some time to research banks before deciding where to take your business. There are many competing banks that will offer certain perks to nonprofit organizations. Some also have more experience than others in working with nonprofits. Find one that has a strong reputation in the industry, and offers benefits that your organization will use. 

Step #6: Establish Initial Documents and Policies

Also known as bylaws, this initial documentation is essential to securing the trajectory of your nonprofit organization. The information included in these bylaws set the standard for board meeting protocols, corporate formalities, and election policies. Bylaws serve as an operating manual for your nonprofit. They do not need to be filed with the state of New Jersey, but they are your organization’s blueprint and need to be treated seriously. 

Pro Tip: It is a best practice to have your bylaws drafted by an individual with intimate knowledge of state and federal law regarding the operations of a tax-exempt organization. 

Step #7: Hold Initial Directors Meeting

Usually referred to as the organizational meeting, your initial meeting lays the foundations of your nonprofit. In it you will establish and approve your bylaws, set up your tax year and accounting period, appoint your officers and directors, and establish your initial transactions (which includes setting up your nonprofit’s bank account). 

In this meeting you should also take detailed minutes, which include a resolution for unanimous decisions made by the board regarding both forming your nonprofit corporation and pursuing tax exemption. The minutes and all other documentation (including bylaws, articles of incorporation, and the written purpose of your organization) need to be filed in a corporate records binder to be kept for the duration of your nonprofit’s existence. 

Step #8: Apply for Federal Tax Exemption

To be granted 501c3 tax exemption from the IRS, your nonprofit will need to file Form 1023: Application for Recognition of Exemption Under Section 501c3 of the Internal Revenue Code. This form is meticulous and detailed, requiring a ton of information from your corporation, including things like your nonprofit history and its organizational structure, finances, operations and activities, governance policy and the like. Including all necessary attachments, you are looking at an average of 50 to 100 pages of information for most nonprofits. This application can be filed electronically and has a filing fee of $600.

Some small nonprofits are eligible to file the 1023-EZ, the short-form version of this exemption application. To qualify your organization must have assets of less than $250,000 and report less than $50,000 in annual gross receipts. Filing the 1023-EZ is simpler and quicker, and the filing fee is only $275. There is however, some controversy surrounding this form, as nonprofit industry groups and advocates believe that small charities that use this form may face difficulty in getting grants. 

 

Pro Tip: When applying for tax-exempt status, we strongly recommend working with an attorney that is knowledgeable in nonprofit tax code. There is a lot of information and documentation that is required of you, and the process can get extremely complex. It is far better navigated by a professional with experience in the field. Unless your founder or one of your board members is already an expert, hire outside help!

Step #9: Apply for State Tax Exemption

In the state of New Jersey, once your nonprofit organization is granted 501c3 status, it is automatically exempt from state corporation business taxes. To be granted exemption from New Jersey sales taxes, however, your nonprofit must file Form REG-1E with the Division of Taxation. 

Annual Reporting

This is important to note: when you have obtained your tax-exempt status, both federal and state, you must maintain compliance by submitting an annual report to both the state of New Jersey and the IRS. 

New Jersey requires that your nonprofit file your corporate report every year with the state treasury department. The filing fee is $25, and the report will contain information on your financial activities, as well as on your current directors and officers. Failure to file a report for 2 consecutive years will result in the revocation of your organization’s New Jersey Business Charter. 

The IRS requires annual reporting through Form 990. This must be done by all nonprofit organizations, and essentially resembles filing a corporate tax return. This form tracks income and expense activities, information about large donors, details about your corporate structure, and other relevant stats. There is no filing fee for this form.

As with the filing of the 1023 for initial tax-exempt status, we strongly recommend having a nonprofit tax professional take charge of your reporting duties. This is a complex process that requires attention to detail, and a knowledge of ever-changing tax rules and regulations. It is better safe than sorry as incorrect filing or missing of filing dates can result in the loss of your hard-won tax-exempt status. 

Step #10: Register for Charitable Solicitation

Before conducting any fundraising activities, you need to check in with the New Jersey Department of Law and Public Safety and Division of Consumer Affairs to see whether your nonprofit is required to register with the state. This will depend upon both the size of your nonprofit, and your potential activities. 

Pro Tip: While nonprofits are not businesses, it is worth it to check that you are not required to have any particular business licenses or permits, as there are often exceptions in the law. You can find out more at the New Jersey Online License and Certification Website

how-to-start-a-nonprofit-in-new-jersey-final-thoughts

Final Thoughts 

After reading through all of the minutiae of forming a nonprofit corporation and applying for tax-exempt status, it is easy to feel a bit overwhelmed. But do not despair! If you move deliberately through each step, and follow the best practices we have listed in this article, you will have your nonprofit up and running before you know it. 

Just remember to read all guidelines on the IRS website to make sure that you are using all of the correct language required of your nonprofit. Even better, hire a professional consultant to handle the details for you. Filing for tax-exempt status is slightly different in every state. A Texas 501c3 is not a Florida 501c3; your New Jersey 501c3 is not the same as a Michigan 501c3, or an Ohio 501c3. 

Start with this guide, then branch out and read all of the resources we have listed throughout this article. Starting a nonprofit in New Jersey is somewhat of a lengthy process, but ultimately extremely rewarding. Ask for help, bring the best people possible on board to further your organization’s mission, and watch it thrive far into the future!

Enjoyed the article? Download it to keep or share with others!

how-to-start-a-nonprofit-in-new-jersey-end

FAQ

💡How much does it cost to start a 501c3 in New Jersey?

This will depend upon several factors, including the size and layout of your organization. There are general filing fees associated with the filing of Form 1023: $600 for the standard and $275 for the 1023-EZ. But there are other fees associated with incorporation, and you should also consider hiring a professional consultant to assist. The price of consultation can also vary. Find out more. 

🔑 How do I start a nonprofit in NJ?

First you must incorporate your nonprofit in New Jersey. There are a series of steps you must fulfill, and documentation to file including Articles of Incorporation. Then you must file a Form 1023 with the IRS as well as a REG-1E with the state to obtain exemption from NJ sales tax. You may also have to register your nonprofit with the state, and obtain a business license (this depends on the nature of your nonprofit). Find out more. 

📝 Can 1 person start a nonprofit?

Many nonprofits have been founded by one person. You can do this, but you will have to bring on at least two other board members (New Jersey law requires at least a 3 person board). Find out more.  

Organization & HR
Daniel
The Holy Grail of Nonprofit Tips ✨
Get all of the information you need to efficiently manage your nonprofit with our monthly newsletter.