Delaware Nonprofit Filing Requirements

by David Carnes
The IRS offers tax breaks to nonprofit organizations.

The IRS offers tax breaks to nonprofit organizations.

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A nonprofit organization issues no shares and distributes no dividends. Because of its nonprofit status, it is eligible for significant state and federal tax benefits, as are its donors. To start a nonprofit organization in Delaware, you must file the appropriate formation documents with the Delaware secretary of state, file for nonprofit status with the IRS and periodically submit certain documents to Delaware and the IRS. Most nonprofit organizations choose to organize as corporations.

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Nonprofit Prerequisites

To form a nonprofit corporation in Delaware, you must either qualify as a tax-exempt organization under Section 501(c) of the U.S. Internal Revenue Code, qualify for nonprofit status under applicable Delaware state statutes, be organized and run as a non-profit organization, or be established primarily for religious or charitable purposes. A nonprofit corporation may not issue stock.

Forming a Corporation

You form a Delaware nonprofit corporation by selecting a unique name for the corporation, appointing at least one director, filing a Certificate of Incorporation for an Exempt Corporation with the Delaware secretary of state and paying the appropriate filing fee. The certificate must list the name of the corporation, the name of the registered agent, the street address of a registered office in Delaware and the name and address of the person filing the Certificate of Incorporation. You must also affirm that the corporation is a nonprofit corporation and will not issue any stock.

Corporate Bylaws

The corporation's director(s) must approve a set of corporate bylaws that govern the holding of meetings, the election of officers and directors, the preparation and retention of records and the execution of other corporate formalities required by Delaware law. The corporation does not have to file bylaws with Delaware authorities, but it must keep them in an easily accessible location.

501(c)(3) Status

After incorporating you should file Form 1023 with the IRS and pay the applicable filing fee. Form 1023 is a 26-page document that requires extensive information about the corporation's organization, activities, purposes, finances and organizational history. If the IRS approves the application, your corporation will become exempt from both state and federal income taxes, and donors will be able to deduct some or all of their donations to the corporation from their taxable incomes.

Delaware Franchise Tax Report

Although a Delaware nonprofit corporation is exempt from paying franchise tax, it is still required to file an annual franchise tax report. The report must list the corporation's registered agent; the addresses of its registered office and principal place of business; the names and addresses of the directors and the corporate officer who signs the report; and the basis for the corporation's tax-exempt status (qualification under Section 501(c), for example). It must also state that the corporation is not authorized to issue shares and that it has not done so.

IRS Form 990

Delaware nonprofit corporations must file an annual informational tax return, Form 990, with the IRS. Form 990 is a 12-page document that requires the corporation to disclose its purposes, activities, tax compliance (employment tax payments, for example), organizational structure, internal policies, revenue, expenses, assets, liabilities, employee compensation and other matters. The corporation must also file a copy of Form 990 with the Delaware Attorney General within four and a half months after the end of its fiscal year.