How to Start a nonprofit corporation in Massachusetts

Now that you have decided to start a nonprofit in Massachusetts, you need to determine the charitable mission and purpose for the business. In order to comply with IRS regulations, it's important that your business is organized for an exempt purpose. Your business may not engage in political activities and must not overcompensate its members.

The next step is to decide on a name for your business. For nonprofits, it's important that you choose a name that clearly represents the mission of your organization. Be sure that the name you choose is easy to pronounce and memorable. Once you've decided on a name for your business, you should conduct a quick trademark search. This can help you find out if the name you want has already been taken and reduce the possibility of rejection. It's also best come up with one or two alternatives, in case the name you want to register is not available.

There are a few rules that Massachusetts nonprofits must follow in order to register a name. First, the name you choose must be not "deceptively similar" to the name of any other business located in the state of Massachusetts. This is to prevent fraud, misrepresentation or confusion. There are cases where substantially similar names that imply an affiliation or relationship would be exempt. For example, First Baptist Church of Sacramento and First Baptist Church of San Francisco would not present a conflict to one another. Neither would Veterans of Foreign Wars Montebello Post 2317 and Veterans of Foreign Wars Inc. Post No. 2627.

You can find out if a name is available by using the Secretary of the Commonwealth of Massachusetts' subject search database. Search for reserved business names by business entity name or requestor name. Be sure to check variations or alternate spellings as well, otherwise your filing may be rejected.

The state of Massachusetts requires you to designate a registered agent for your business when you complete your Articles of Incorporation. A registered agent (often abbreviated as RA) is responsible for receiving legal and official documents on behalf of your business. An RA acts as the state's means to communicate with your business. This may be an individual or corporation that agrees to accept legal papers on the nonprofit's behalf.

A registered agent can be any individual who resides in Massachusetts. A third-party registered agent service, like MyCorporation, may also be utilized for the business. An RA must have a physical street address in Massachusetts as a P.O. Box address is not allowed. A nonprofit corporation may not serve as its own registered agent.

Why designate a third party to act as my registered agent?

Registered agent information is publicly available. This may cause privacy concerns for business owners who do not wish to list their personal contact information for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Registered agents are highly valued for their discretion. For example, if you did not have a registered agent and your business was served with lawsuit paperwork the documents would be delivered directly to your business address. This could be incredibly embarrassing for the business owner, especially if this happened in front of customers. An RA will accept the documents privately to ensure additional privacy, organize the materials, and then deliver them to the business owner.

This is why many business owners opt for a third-party registered agent service like MyCorporation to act as a registered agent on behalf of their business.

The state of Massachusetts requires you to file Articles of Incorporation in order to legally create a nonprofit. The Articles of Incorporation is a simple one-page form that contains all the basic information required to register your business, including the following:

1. Name of the nonprofit corporation
2. Purpose of the nonprofit corporation engaging in the following activities
3. One or more classes of members
4. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation
5. Effective date of organization
6. Street address of the principal office of the nonprofit corporation in Massachusetts
7. Name, residential address, and post office address of each director and officer of the nonprofit corporation
8. Fiscal year of the corporation that ends on the last day of the month of (fill in the blank)
9. Name and business address of the resident agent
10. Signature of incorporator(s) and date

A filing fee of $35 must be made payable through check or money order to the Secretary of State. Make all checks payable to the Commonwealth of Massachusetts.

Bylaws are the detailed set of rules agreed upon and adopted by the board of directors of the nonprofit. Think of these as an instruction manual to run the business. They include rules and procedures related to meetings you will hold, and notes on the ways you will elect officers and directors of the business.

While a nonprofit corporation is not legally required to create bylaws in Massachusetts, it is highly recommended. Bylaws help maintain consistency in the way your business operates, as well as communicate organizational rules that help avoid conflicts and disputes. Bylaws are for your records only and are not submitted to the state.

If you are not sure how to create corporate bylaws, you can purchase MyCorporation's customized Minutes and Bylaws package. Inside our package you will find internal documents required to fulfill your corporate formalities and properly operate your business after it has been incorporated.

The first board meeting for your business is often referred to as the organizational meeting of the board. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers.

This meeting and all future meetings of the board of directors must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are kept with the corporate records.

Corporate minutes are required for all Massachusetts nonprofit corporations by law. Falling behind on this critical task can cause your business to fall out of good standing, and even jeopardize its tax-exempt status. It is important to maintain a corporate minute book. Inside you may keep originals or copies of all the signed and approved minutes or Actions by Unanimous Consent from any special or annual meetings of the corporation's shareholders and directors.

An EIN (also referred to as a Federal Tax ID) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is less sensitive. Like an SSN, an EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, and build credit for your business
• Apply for applicable business licenses when required
• File for tax exempt status

You will only need a few pieces of information to file, including your mailing address and legal business name. You can apply online Opens in a new window with the IRS by downloading IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.

Your nonprofit corporation is not automatically tax exempt. In order to become tax exempt, you will need to take certain steps to obtain this status. First, you will need to file for exempt status with the Internal Revenue Service using either Form 1023 (PDF)(866 KB) Opens in a new tab or Form 1024 (PDF)(360 KB) Opens in a new tab, depending on the classification of your organization.

In some cases, you may be eligible to file Form 1023-EZ Opens in a new window, a streamlined version of the application for recognition of tax exemption. You can avoid a $25 fee if you file for federal tax exemption before filing with the state.

You can learn more about the process directly from Publication 557 from the IRS (PDF)(2.1 MB).

It is advised that your nonprofit corporation checks in with the Massachusetts Secretary of State for this section. The state will further detail if your nonprofit corporation needs a solicitation permit and the charitable solicitation laws set throughout the United States.

Many businesses need licenses or permits to operate in Massachusetts. It is also important to obtain a license to practice certain professions in Massachusetts as well. Find out more about licensing requirements necessary for your startup by visiting the business licenses and permits portal at Mass.gov.

In the event that you need a bit of help, you may also turn to MyCorporation's business license compliance package. Our skilled professionals will do the work for you. We identify all of the licenses required by your business and provide you with the information you need in order to file.