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How to Start a 501c3 in the State of Ohio

Danica

Launching a tax-exempt nonprofit requires more than just filling a 501c3 application; this rather involved process includes a number of steps that must be followed to the letter. However, do not worry! While the amount of paperwork required of you may seem overwhelming at first, with knowledge on your side, you can greatly mitigate the frustration and difficulty that sometimes comes with it. 

Rules for forming a 501c3 vary from state to state. Learn exactly what you need to do to establish one in the state of Ohio in this comprehensive guide, which includes hints, tips, and a whole host of resources. We cannot wait for you to bring your vision to life!

Let’s go!

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Before Applying for Tax-Exempt Status in Ohio

In this section we will take you step-by-step through the earliest stages of creating a nonprofit organization in Ohio.

Conduct Research

First and foremost, you must know what is expected of your organization before you begin the process of applying. It will be far more streamlined and simple if you understand what exactly is required of you - what information you need to gather and even how you should present it - before you begin, which will help you to avoid common mistakes. 

To start, determine whether your organization will even meet the basic qualifications for 501c3 status. You may learn about them through the IRS website, where they have a list of requirements, along with examples of tax-exempt entities. 

Name Your Organization

When naming your organization in Ohio, you must be sure that it is easily distinguishable from other businesses registered in the state. You may search the business name database on the Secretary of State’s website to determine whether your name is available. If it is, you can file a name reservation with the Secretary of State to hold it for 180 days. You can apply for this reservation online or by post for $39. 

ohio-501c3-before-applyingAnthony is putting deep thought into what he should name his organization – as he should!

Set Up Your Nonprofit’s Governing Structure

Your nonprofit will need to conduct an initial meeting (typically coined an organizational meeting) with all potential board members to lay out the groundwork of your organization’s governing structure and set up your corporate records. In this meeting you should do the following:

  • Elect your directors (in Ohio you need 3!) 

  • Appoint officers

  • Approve your nonprofit bylaws (see below)

  • Set up your accounting period and tax year

  • Open a corporate bank account and approve any other initial corporate transactions

Pro Tip: Be sure to set up your records binder. This should contain bylaws, your articles of incorporation, minutes, consent forms, and any other important documents. 

Form Bylaws and Conflict of Interest Policy

One of the first orders of business for your governing board is to create a series of bylaws that are compliant with Ohio law. These bylaws give shape to and solidify your nonprofit’s rules and procedures, including how you will elect members and officers, how and when meetings will be held, and any other corporate formalities required in the state of Ohio. 

While essential, these bylaws are simply an operation manual for your organization, and do not need to be filed with the state. 

A conflict of interest policy is a document that outlines your nonprofit’s procedure for dealing with any potential conflicts of interest. This document is not legally required in Ohio, but is absolutely necessary on both a federal and state level to protect your organization. 

A conflict of interest policy is essential to building a reputation of transparency and honesty for your stakeholders, as well as to the general public. In addition, IRS requirements dictate that a nonprofit must annually submit the following information, which:

  • Indicates that they have adopted a conflict of interest policy

  • Discloses any potential or existing conflicts

  • Confirms that your organization is enforcing policies

If a conflict of interest is discerned by authorities and your nonprofit cannot show that you have a policy in place, or that action is being taken, you are in danger of losing your nonprofit status. Penalties on anyone perceived to have received financial benefit as a result typically start at an excise tax rate of 25%. 

File for an Ohio Certificate of Formation

An Ohio 501c3 must file for a certificate of incorporation with the Ohio Secretary of State. These articles must contain some basic information and can be filled out online and filed electronically. You can also choose to print a fillable form and send it through the post. The filing fee for either is $99. The information required to form a nonprofit in Ohio is as follows:

  • Name of the nonprofit

  • Location in the state where your main offices will be located

  • Your registered agent’s name, address, and signature

  • Purpose for which your nonprofit has been formed

It is important to note that while this information is all that is necessary for Ohio, you will need to incorporate certain language that is required for federal 501c3 tax-exempt status. Such language includes:

  • Your statement of purpose, which must meet IRS requirements (these can be found on their website)

  • A written statement that your organization will not become involved in activities that are unrelated to your stated nonprofit purpose, and that it will not engage in prohibited legislative or political activities

  • A dissolution clause that outlines how your nonprofit will disburse your its assets to the government or another 501c3 upon dissolution

Appoint a Statutory Agent in Ohio

An agent for service of process is required for every corporation based in Ohio - and in nearly every state, including for Texas 501c3’s, Michigan 501c3’s, and Florida 501c3’s. This individual or corporation must agree to accept legal papers on the organization’s behalf if it is sued. The requirements for a registered agent in Ohio are as follows:

  • They must be a resident of Ohio or a corporation based in Ohio

  • They must have a physical street address, not a P.O. Box

  • They must consent to the appointment

Often for a smaller nonprofit, an officer or director serves as the initial agent. 

Articles of Incorporation

The articles of incorporation are synonymous with the certificate of formation. See above for details.

ohio-501c3-before-applyingNancy is loving all these step-by-step tips! 

Apply for a Federal Employer Identification Number

Before applying for tax exemption, your nonprofit organization will need to get a federal employer identification number, or EIN. This can be done by completing the online application found on the IRS website. There is no fee due when filing for an EIN. 

Obtain Any Required Business Licenses

Depending on location and the types of activities your nonprofit will perform, you may need to obtain an Ohio business license. Check out state requirements on the Ohio Business Gateway site at Ohio.gov. 

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Applying for 501c3 Status

Now that your organization has completed all of the formalities required of you prior to filing, it is time to apply for federal and Ohio state tax exemptions. Here is what you need to do. 

Federal Tax Exemption

The form required to file for 501c3 tax exemption on a federal level is IRS Form 1023. You will have to input a lot of information, including your nonprofit’s history, organizational structure, finances, operations and activities, and governance policies. 

If you are a smaller nonprofit, defined as an organization with total assets of less than $250,000 and annual gross receipts of less than $50,000, then you qualify to fill out the short form, Form 1023-EZ. This may be filed online. 

Pro Tip: There is a lot of minutia involved with the filing process. When applying for 501c3 tax-exempt status, your nonprofit should work closely with an attorney that is familiar with nonprofit tax law to ensure that everything is in good order. 

Obtain Your Ohio State Tax Exemption

Any nonprofit that is granted 501c3 status from the federal government is generally exempt from commercial activity tax in the state of Ohio. State sales tax exemption can be obtained by filing a Form STEC B (Sales and Use Tax Blanket Exemption Certificate) at the Ohio Department of Taxation. 

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Summary and Definitions

In this section we include, for quick reference, a list of the documents, websites, and definitions we have discussed in this article. 

Required Forms

Form 1023. This form is available on the IRS website is the required application for 501c3 tax-exempt status for eligible midsize or large corporations. This is defined as any nonprofit that has more than $250,000 in assets and has gross annual receipts totaling more than $50,000. The filing fee for Form 1023 is $600. 

OR

Form 1023-EZ. This truncated version of Form 1023 is the nonprofit application for 501c3 tax exempt status for small nonprofits. This is defined as an organization that has less than $250,000 in assets and gross annual receipts totaling less than $50,000. The filing fee for Form 1023-EZ is $275. 

Form STEC B. This is the Sales and Use Tax Blanket Exemption Certificate that must be filed with the Ohio Department of Taxation to obtain exemption from Ohio sales tax. 

ohio-501c3-summary-and-definitionsEllie is taking note of the terms and definitions she wants to remember!

Terms and Definitions

Federal Employer Identification Number (EIN). This is a number obtained through the IRS website by completing an online application. It helps differentiate your corporation from all others and is a prerequisite to filing for tax-exempt status. There is no filing fee. 

Articles of Incorporation. Also known as certificate of formation, this is information that must be filed with the state of Ohio and includes the name of your nonprofit, address, purpose, and all information pertaining to your agent of process. 

Board of Directors. The governing board of your nonprofit organization.

Bylaws. This documentation is the operational guide to your nonprofit. It should contain the systems and standards used by your nonprofit including information like your procedure for electing board members, how meetings are held, and any other corporate formalities.

Tax exempt status. Status obtained through 501c3 application with the IRS. This is available to educational institutions, charitable organizations, churches, and some others. There are some other ways to obtain tax-exempt status for nonprofits and other eligible organizations, but this guide deals solely with the 501c3 route. 

Websites and Organizations for Further Reference

Ohio Secretary of State website. On this website you can find a wealth of information and forms for forming a nonprofit corporation in the state of Ohio, such as a business name database, rules and regulations, and business licensing. 

IRS.gov. The official home of the IRS offers guidelines and regulations for nonprofit organizations, as well as the necessary forms to apply for Ohio 501c3. 

Ohio Department of Taxation. You can visit this site to obtain your sales tax exemption for the state of Ohio. 

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Final Thoughts 

Becoming an Ohio 501c3 corporation is an involved but ultimately rewarding process. By obtaining tax-exempt status for your organization, you can put more money back into your organization’s mission. Understand that it is essential to follow all procedures to the letter, and that the filing process should be completed with the assistance of an attorney that is familiar with nonprofit tax law. 

Once you have obtained tax-exempt status, it is up to your organization to do everything necessary to hold onto it. You must stay in compliance with federal, state, and local tax laws, and file annual reports to the IRS through Form 990 or Form 990-N. Failure to do so could result in losing your hard-won tax-exempt status. So stay on task and watch your Ohio nonprofit thrive and grow in the years to come!

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FAQ

💡How do I apply for a 501c3 in Ohio?

The short answer is that you would file for your corporation through IRS Form 1023. But there are a number of steps to take before you file to ensure that your nonprofit is eligible. These include filing articles of incorporation, structuring your board, naming your organization, and obtaining an EIN. Find out more. 

🔑 How much does it cost to form a 501c3 in Ohio?

This can change depending on a variety of factors. The actual filing with the 1023 is $600, and filing with 1023-EZ is $275. There are minor fees attached to some of the other filings, such as name reservation and state exemptions. However, it is a best practice to hire a tax attorney to assist with the process, and this fee can add a substantial (but ultimately worthwhile) amount. Find out more. 

📝 What to prepare before applying for 501c3 status in Ohio?

Be sure that all of your corporation paperwork is secure. This includes things like articles of incorporation, bylaws, EIN, name registration, and any required business licenses. Find out more.  

Organization & HR
Danica