The majority of nonprofits in Arizona are 501(c)(3) organizations that fall into the categories of religious, charitable, scientific, literary, or educational entities that are eligible for federal and state tax exemptions. To create an Arizona nonprofit, you first need to form an Arizona nonprofit corporation and then apply for tax-exempt status from the IRS and the state.
Following are the necessary steps to form an Arizona nonprofit:
- Select a name. The name you choose as the legal name for your nonprofit in Arizona cannot conflict with an existing registration. Check the Arizona Corporation Commission’s Name Search page to identify any potential issues.
- Choose director(s). Arizona law requires the naming of at least one director, although you should have at least three unrelated directors to meet IRS requirements for 501(c)(3) organizations.
- Appoint a registered agent. A registered agent is responsible for receiving legal notices on behalf of your nonprofit. The agent must be located in Arizona and maintain regular business hours.
- File articles of incorporation. Each state has legal requirements for language in articles of incorporation; in addition, the IRS requires certain basic provisions in the articles of incorporation when applying for 501(c)(3) status. While the Arizona Corporation Commission provides a standard form, it does not include language required by the IRS to obtain 501(c)(3) status. You should customize the articles with the help of an Arizona nonprofit attorney to ensure you meet legal requirements and avoid having to amend the articles later.
- Publish articles of incorporation. Under Arizona law, new nonprofits must publish their articles of incorporation within 60 days. The articles must be published in the county of the nonprofit’s place of business in three consecutive issues. Nonprofits located in Maricopa or Pima counties are exempt from this requirement.
- Obtain an EIN. The IRS requires that nonprofits obtain an Employer Identification Number (EIN), even if it has no employees. The EIN will be used to obtain bank accounts, apply for 501(c)(3) status, and submit Form 990 returns to the IRS.
- Create bylaws and policies. Bylaws are the governing document for your organization and should conform to your articles of incorporation as well as the law. Bylaws must be ratified by the nonprofit’s Board of Directors at their first meeting. In addition, your nonprofit also needs to adopt a conflict of interest policy to ensure directors and officers fulfill their fiduciary duty of care to place the interests of the organization above their own. The IRS requires that a nonprofit’s bylaws and conflict of interest policy be approved and adopted prior to filing an application for 501(c)(3) status.
- Conduct an organizational meeting of the Board. An initial organizational meeting of the Board of Directors must be held to approve bylaws, adopt a conflict of interest policy, elect other directors and officers, and approve resolutions.
- Apply for 501(c)(3) status. To be recognized as a tax-exempt organization, you must apply to the IRS for 501(c) tax exemption. This will allow your nonprofit to apply for grants and solicit donations in addition to being exempt from federal income tax and Arizona corporate income taxes. The federal application for exemption is complex and lengthy and is best completed with the assistance of an experienced nonprofit attorney to ensure full compliance with the law.
Provident Law’s church and nonprofit attorneys are here to answer questions and to aid in establishing and crafting policies governing nonprofit governance. We recognize how essential the missions of nonprofit and religious organizations are for society, and we stand ready to counsel and serve the churches and nonprofit organizations of Arizona. Contact us to learn more.