How to start a New York nonprofit

Start by doing research. Is your nonprofit serving a mission in the community? And do you have the means to maintain it? Then make your case: write your mission statement, think about a name, and select your directors carefully. After that, all there’s left to do is file. 

Advantages and disadvantages of having a New York nonprofit organization

A nonprofit is an entity or association created to promote and maintain the well-being and greater good of a community, in which profits (or surplus) are directed towards the business and mission rather than divided among the owners and shareholders. Here are the pros and cons of having one in New York:
 

PROS

CONS

Forming a nonprofit protects your personal assets from your nonprofit's lawsuits and creditor claims. It also protects your trustees, officers, and volunteers. New York nonprofits are usually exempt from federal tax on any income related to your organization's exempt purposes. You can obtain an exemption from collecting sales and use taxes if your organization is formed under IRS Section 501(c)(3). Your nonprofit may qualify to receive public and private grant money.

Because your nonprofit is not owned by you or your shareholders, you won't have individual control and autonomy over your organization. More paperwork is involved, such as creating bylaws and recording and maintaining corporate minutes. You'll need time and money to apply for the federal tax exemption, and you'll need an accountant or legal professional to help you operate your nonprofit. Your nonprofit's finances are subject to public inspection.

How to form a nonprofit in New York

1. Developing a business plan for your New York nonprofit

• Define the purpose and goals of the organization.
• Research the issues and determine what resources you have and need.
• Establish your priorities.
• Market your idea to possible volunteers and board members.
• Create a budget and timeline.

2. Writing a mission statement 

A mission statement clarifies your goals and explains how you plan to meet them. As a guideline, describe what, where, when, and how your nonprofit's purpose will be met, as well as who is going to help your nonprofit meet it. It may take a few tries to narrow your ambitions down into a workable plan.

Although you're creating a nonprofit because you want to give back to your community, you still have to meet certain requirements to protect yourself and to ensure that you achieve your organization's goals. When you create a mission statement, you can explain your organization's purpose. Consider what problem or issue your organization wants to address, then focus your statement on including the efforts and values that will guide your nonprofit to these goals.

3. Choosing a unique name 

Your nonprofit's name must be distinguishable from existing names registered with the New York Secretary of State. This means it shouldn't be the same as or too similar to another organization's name. The name should also not be misleading to the public – it must accurately reflect the nature and purpose of your organization.

4. Filing your Certificate of Incorporation in the state of New York

This is the legal document that brings the business to life. It includes important information like the nature of the company and the location of the corporate headquarters. Once accepted, the corporation becomes its own legal entity.
 

Other forms and requirements for New York nonprofits: Name reservation request form. Certificate of type. Nonprofit Bylaws. Certificate of assumed name. IRS Form 1023: Application for Recognition of Exemption. Form SS-4: Application for employer identification number. IRS 501(c)(3) determination letter. Form CT-247 to obtain New York income tax exemption. Form ST-119.2 to obtain New York sales tax exemption. EPTL Form Char 410 Charities Registration Statement, to be filed with the New York Attorney General's Office prior to solicitations of contributions or within 6 months after property is held or income is received. IRS Form 990: Annual Information Return.

5. Applying for grants and loans in New York 

Grants and loans from federal, state, and private sources are a major source of funding for New York nonprofits. A not-for-profit corporation is responsible for complying with grant requirements and keeping appropriate records. It's important for nonprofits to keep money received from grants separate and apart from the nonprofit's general fund. A good reputation in administering grant monies helps nonprofits obtain more funding from these sources. 

What to do after forming a nonprofit organization in New York

After forming your New York nonprofit organization, you must follow specific guidelines to retain your status:

• Keep detailed records of all sources of income.
• File annual reports.
• Keep unrelated activities separate from your nonprofit and pay separate taxes on them. This income could jeopardize your nonprofit status if it makes up a substantial portion of your business.
• Ensure that the time and resources spent on your nonprofit are related to your organization's exempt status.
• Maintain detailed records of corporate meetings.
• Make sure your nonprofit's assets are distributed to another tax-exempt group when and if it dissolves.
• Do not make loans to any of your directors or officers.
• Do not issue shares of stock or pay dividends or other shares of income to members, directors, or officers.

New York nonprofit resources

1. City of New York, Office of the Mayor (PDF): This is an excellent resource for New York nonprofits that are seeking loans or grants. The New York City Returnable Grant Fund provides interest-free loans on a short-term basis.
2. Nonprofit Finance Fund: This is a community development fund that provides loans and lines of credit to nonprofits, as well as financial training workshops, analysis of businesses, and advice regarding how to maximize use of grants.
3. Candid: For information on how to receive funds from the New York City Council for nonprofit, community-based social service providers, visit this website. It also discusses discretionary funding for nonprofits.

Still have questions? Learn more about how to register your own nonprofit with Rocket Lawyer and get started today!
 

Key takeaways Starting a nonprofit takes planning, like creating a mission statement, picking a name, and choosing responsible directors to lead the group. There are good things about having a nonprofit in New York, like tax breaks and protection from personal lawsuits, but it also comes with extra paperwork and public financial records. After forming a New York nonprofit, it’s important to stay organized, follow state laws, and stay focused on helping the community to keep your nonprofit status.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is a nonprofit organization?
• How to start a nonprofit organization
• How are nonprofits taxed?
• How to get 501(c)(3) tax-exempt status
• How to register a nonprofit by state