Before deciding to create a nonprofit, consider other organization structures. Perhaps a fiscal sponsorship, a business, or an LLC would be a better option for you, instead of a nonprofit.

This guide is for you if you have determined that a 501(c)(3) charitable nonprofit corporation structure is the best organization type for your project or mission, and you have ensured that you will meet the state and Internal Revenue Service (IRS) requirements. Meeting these requirements from the start will help avoid having to make amendments later or risk getting your 501(c)(3) application rejected. This guide describes the steps you need to take to become a tax-exempt nonprofit organization in the state of Indiana.

During the formation of the nonprofit organization, there are three separate agencies that will be involved: The Indiana Secretary of State, The Indiana Department of Revenue, and the IRS. The requirements of all three agencies must be met to ensure compliance. Each agency also has specific reporting requirements.

 

Define Your Mission, Vision, and Goals

Before you determine what kind of organization is most appropriate for you, take some time to define your organization’s mission, vision, purpose, goals, and objectives. What need are you trying to fill? What wrong are you trying to right? What information are you trying to teach? Try to answer this question in 50 words or less. Your mission statement should explain why people will want to invest in your organization (as donors, volunteers, or recipients of service). Information on writing Mission and Vision statements is available from Iowa State University. 

 

Check Name Availability

Once you define the unfulfilled need in your community or state, it’s time to think of a name for your nonprofit. Consider your name carefully, as it establishes your nonprofit’s brand and image.

The legal name of your nonprofit organization may not conflict with any other registered name. Conduct a name search at the Indiana Secretary of State website to check availability of your desired name. The name of your nonprofit should align with your mission statement and also follow the rules for naming in your state. In Indiana, your nonprofit corporation name must include "corporation," "incorporated," "limited," "company," or an abbreviation. The name of your nonprofit in Indiana cannot imply that it is intended for any other purpose other than what is stated in your Articles of Incorporation or allowed by Indiana state law. Refer to the Indiana General Assembly’s official guidelines for the complete rules on naming an Indiana-based nonprofit.

The name of a business corporation or nonprofit corporation must contain the word "corporation," "incorporated," "company," or "limited," or the abbreviation "Corp.," "Inc.," "Co.," or "Ltd.," or words or abbreviations of similar import in another language. 

 

Appoint an Indiana Registered Agent 

A registered agent is a legal appointee who is responsible for receiving legal notices for your nonprofit. The role of the registered agent is to accept necessary and legal documentation from the state on the nonprofit’s behalf. Ultimately, the registered agent for your Indiana nonprofit is your business’s point of contact with the state. The Registered Agent is the legal representative and contact for the nonprofit. The Registered Agent cannot be the business entity itself. The Registered Agent may be a person or another formal business association which was incorporated (or qualified) in Indiana and which maintains a valid Registered Agent in Indiana. The business address of the Registered Agent must be identical to the office address. You may choose to nominate or appoint anyone as your registered agent, however, the individual must meet the following requirements:

  • Be a resident of Indiana.
  • Have a physical street address in the state of Indiana; a PO box number is not sufficient unless a rural route number is part of the address.
  • Maintain regular business hours, considering they will be receiving important documents on the nonprofit’s behalf.
  • Be at least 18 years old.
  • Consent to the appointment.
  • You may choose to appoint yourself as your nonprofit’s registered agent, however, please note that you should only do so if you know you are able to maintain normal business hours.

A registered agent is responsible for receiving legal notices on behalf of your organization. The appointed registered agent must be physically located in the state and maintain an office that is open during regular business hours. 

 

Form a Board of Directors

All nonprofits are governed by a board of directors—a group of volunteers that is legally responsible for making sure the organization remains true to its mission, safeguards its assets, and operates in the public interest. The board is the first line of defense against fraud and abuse.

In Indiana, a minimum of three directors is required and the number of directors must be articulated by the articles of incorporation (or bylaws). Directors make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success. You’ll want to identify three unrelated individuals to meet IRS requirements.  

The directors of the nonprofit come together to form the board of directors responsible for governing the organization’s operations. Indiana officer requirements include: a president, a secretary, a treasurer, and other officers appointed by the board of directors. One officer prepares minutes of the directors' and members' meetings and authenticates records of the corporation. This part of the nonprofit process is usually handled during the organization’s first board meeting.

 

Hold a Meeting of Your Board of Directors

The initial organizational meeting of your board of directors will be incredibly productive. At this meeting, you'll approve the bylaws, adopt the conflict of interest policy, elect directors, appoint officers, and approve resolutions such as opening the organization’s bank account. Important decisions are being made so be sure to record them in the meeting minutes. Your first board meeting is usually referred to as the organizational meeting of the board. The board should take such actions as:

  • Approving the bylaws.
  • Appointing officers.
  • Setting an accounting period and tax year.
  • Approving initial transactions of the corporation, such as the opening of a corporate bank account.

After the meeting is completed, minutes of the meeting should be created. You should set up a corporate records binder for your nonprofit to hold important documents such as articles of incorporation, bylaws, and minutes of meetings. 

 

Adopt Bylaws and the Conflict of Interest Policy

Every Indiana nonprofit organization must have two very important documents in order to file for 501(c)(3) tax exemption with the state of Indiana. These two documents are the:

  1. Bylaws
  2. Conflict of interest policy

Your organization will need bylaws that comply with Indiana law and contain the rules and procedures your corporation will adhere to for holding meetings, electing officers and directors, and taking care of other corporate formalities required in Indiana. Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and the law. When your board of directors meets for the first time, you’ll review and ratify the bylaws and they will be a roadmap for governance from there.

At the same time, you’ll also want to create and adopt a conflict of interest policy. A conflict of interest is when someone in a key position in your nonprofit has competing interests and is making choices that could benefit themselves to the harm of the organization. The conflict of interest policy is an accumulation of rules ensuring that all decisions made by the board are always in the best interest of the nonprofit organization and to further the cause rather than benefiting individual members and their personal agendas. Personal interests should be set aside and organizational interests prioritized. If a conflict of interest does arise, it should be disclosed immediately.

While you are not required to file your bylaws and conflict of interest policy, they are required for your application to the IRS for 501(c)(3) exemption—so ensure that they are stored in a safe place. You can use them for your 501(c)(3) tax exemption application and refer to them if ever a conflict of interest arises within your nonprofit organization. 

Information on bylaws and conflict of interest policies and samples are available from Candid Learning.

 

File Articles of Incorporation

Articles of incorporation are filed with the Indiana Secretary of State Business Services Division. These articles represent the “birth certificate” for the organization, and set the basic ground rules by which the organization operates. 

According to Indiana Code 23-17-3-2, the articles of incorporation must include:

  • The name of the corporation (which must include “Corporation,” “Company,” “Incorporated,” Limited,” or an abbreviation thereof).
  • A statement as to whether the corporation will be a public benefit, religious, or mutual benefit corporation.
  • The name and address of the Registered Agent.
  • The name and address of all the incorporators.
  • A statement as to whether the corporation will have members.
  • A statement regarding the distribution of assets upon dissolution.

 

Apply for an Employer Identification Number (EIN)

An EIN is a unique tax identification number for your nonprofit, which you will provide on the nonprofit's state and federal tax returns, bank account, and other government filings. You must have an EIN before you can submit your tax exemption applications. Submit a free application for an EIN on the IRS website. 

Every nonprofit organization in the state of Indiana needs an employer identification number (EIN). This is used by the federal government to identify business entities. Essentially, this is a Social Security number for your organization.

An EIN is useful in many instances, including:

  • Opening up a business bank account for your nonprofit corporation.
  • Applying for federal and state tax exemptions for your nonprofit.
  • Submitting 990 returns.
  • Hiring employees to work in your nonprofit organization.

The EIN is obtained from the IRS, completely free of charge. Find information about the form, IRS Form SS-4, then submit the form online via the IRS website.

 

Apply for 501(c)(3) Status

Incorporating as a non-profit does not automatically result in 501(c)(3) status or state sales and income tax exemption. These must be applied for separately. To successfully obtain 501(c)(3) status, an organization must be able to show a defined charitable purpose, and a structure that ensures that the organization benefits the public, not the employees or owners of the organization. 

In order to have eligibility for 501(c)(3) tax exemption, your nonprofit organization must have already elected at least three directors unrelated to each other, filed articles of incorporation, adopted bylaws and a conflict of interest policy, and obtained an EIN.

Complete and file IRS Form 1023 or form 1023-EZ, application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, in order to obtain federal tax-exempt status. This form asks for lots of information about your organization, including its history, finances, organizational structure, governance policies, operations, activities, and more. Information on the application for recognition of exemption is available via the IRS.

Being granted 501(c)(3) tax exemption from the IRS comes with many benefits, including:

  • The ability to accept funding that is tax-deductible to the donor.
  • Possible exemption from property and state sales taxes.
  • Exemption from state and federal income taxes.
  • Likely higher gateways before experiencing federal or state unemployment tax liabilities.
  • Access to grants.
  • Discounts on United States postal services.
  • Pubic legitimacy and credibility from IRS recognition.

Once your application is approved, you’ll receive a determination letter, which states that your Indiana nonprofit is now one of the exempt organizations in the nonprofit sector.

 

Obtain an Indiana Taxpayer Identification Number/Accounts & Indiana State Tax Exemption

Once you receive the determination letter, it simply means that you are one of the existing organizations that are exempt from federal taxes. However, you still need to file an application for state income tax exemption. Indiana nonprofits can apply for exemption from paying adjusted gross income and sales tax on purchases. The Indiana Department of Revenue is responsible for issuing the organization an Indiana taxpayer identification number and issuing authorization for sales tax exemption. Both of these are accomplished by filing Form NP-20A. You will need to attach your federal Letter of Tax Exempt Determination to form NP-20A, which you will receive after applying for federal 501(c)(3) tax exemption.

Once the application is approved, you’ll receive a nonprofit tax registration certificate, and if needed, Form ST-105 may be used to provide your exemption details to sellers. This form as well is due within four months of incorporation, and the IRS determination letter must be attached to the application.

 

Next Steps

  • Store nonprofit records

    As you establish your nonprofit, you will receive a number of official documents: EIN letter, bylaws, meeting minutes, 501(c)(3) determination letter, and more. Take time to organize these documents in one place; it will save you a headache in the future!

  • Create an elevator pitch

    Your elevator pitch is what you would tell someone about your organization if you only had two minutes with them in an elevator. This may sound silly, but it's actually fundamental; you need to be able to clearly and concisely articulate what your organization is all about. This is not the same as your purpose or mission statement. 

    Think more organically. Your ability to effectively communicate your message can make a huge difference in attracting the support that your organization will need. 

  • Write a business plan

    Your nonprofit needs a business plan before you do anything else. This is a roadmap of your vision for the nonprofit and how you hope to bring about or meet the unfulfilled need. You’ll also need to be proactive, have a strategic plan, a financing plan, and of course, a pitch for capital. Ultimately, having a competent board of directors who share your organization’s mission is also key to running a successful nonprofit.

  • Apply for a solicitation license with your city

    Check to see if your city requires you to have a solicitation license before you can solicit funds. 

  • Apply for a bulk mail permit from your post office

    A mailing permit is permission to use a certain postage payment method for commercial mailings. Information on bulk mail permits is available via the USPS.

  • Manage risk by obtaining insurance

    You may need to obtain various insurance policies for your nonprofits. 

  • Set reminders for required annual filings and forms in order to stay in compliance

  • Open a business bank account

    To open a bank account, you will need to provide your EIN, a copy of your articles of incorporation, and a copy of your organization’s bylaws. 

  • Create a website and business email account

 

For more information about establishing a 501(c)(3) organization, please contact the Nonprofit Central Librarian via email using this form.

Updated May 22, 2024