How to Start a Nonprofit in Pennsylvania: A Comprehensive Guide - Step-by-Step Process on How to Start a Nonprofit in PA

How to Start a Nonprofit in Pennsylvania: A Comprehensive Guide - Step-by-Step Process on How to Start a Nonprofit in PA

Ever wondered why you want to form a nonprofit? Are you deeply passionate about a community issue? Maybe you've got a fresh or better approach to fix it? Figuring out the "why" behind forming a nonprofit is your very first move in the whole process.

Once your purpose is clear, the next steps involve putting together the legal stuff to set up your organization officially. As you navigate through the paperwork, it's essential to define your mission, lay out your purpose, and lay a solid foundation for a strong organization. This includes having a clear vision and establishing the core values of your nonprofit.

This article walks you through each step of how to start your nonprofit in Pennsylvania. Sure, it might sometimes feel tedious and lengthy, but let your purpose be the driving force, pushing you forward, especially when things get tough. As you go through these steps in starting your nonprofit, keep your vision front and center.

What is a Nonprofit in Pennsylvania and Is It Federal Tax-Exempt?

Nonprofit entities in Pennsylvania are recognized as legal structures dedicated to serving public interests and addressing community concerns. Diverging from their for-profit counterparts, nonprofits prioritize public benefit over profit generation. Typically granted tax-exempt status by the Internal Revenue Service (IRS), these organizations in Pennsylvania focus on various community issues such as education, religion, charity, and social services. Additionally, they enjoy tax exemptions on funds acquired through fundraising, donations, and charitable funding.

Starting Your Pennsylvania Nonprofit Corporation

If you want to start a nonprofit in Pennsylvania, the initial requirement is incorporation. We will guide the process of forming a nonprofit corporation in Pennsylvania through ten straightforward steps. 

Step 1: Name Your Pennsylvania Nonprofit

When you're kicking off a fresh project or setting up a new organization, the initial key step is nailing down the right name. This step holds significant weight in elevating your nonprofit corporation's status in Pennsylvania. Your organization's name should encapsulate its mission and purpose.

The Secretary of State's website is the go-to spot for checking the availability of your chosen names. Additionally, you get a two-month window to reserve the name, ensuring that no other company swoops in to register it during that time.

While it may seem straightforward, picking the perfect name for your nonprofit corporation can be a game-changer in Pennsylvania. Always avoid infringing on other entrepreneurs' brand rights at all costs.

Step 2: Search for an Incorporator

Before making any hiring decisions, it's crucial to learn and understand the significance of an incorporator. This person has the skills to prepare, draft contracts, and submit all the essential articles for your corporation. Selecting the right incorporator helps weave your corporation into the fabric of Pennsylvania. Subsequently, you can start looking for a responsible board of directors, with Pennsylvania mandating at least three directors for your initial board.

Step 3: Hire Your Registered Agent

A registered agent is a person who receives official notices and keeps tabs on the organization's documents. The chosen individual for this role should be available during working hours, have a proper office setup, and be physically present in Pennsylvania to manage the company's concerns.

Selecting a registered agent for your nonprofit corporation is another important step, as this person will handle your personal and official legal documents and maintain your nonprofit compliance. Providing them with secure online account access is recommended to simplify record-keeping.

Additionally, it's crucial to register the name and address of your chosen registered agent before submitting the organization's reports to the state. The agent's services can be comprehensive or part of specific formation packages.

Step 4: File the Articles of Organization, Apply for an EIN, and Federal 501(c)(3) Status

Filing the articles of organization is another crucial step in forming your nonprofit entity. Pennsylvania requires a formation license before requesting an Employer Identification Number (EIN).

Information Required on Official Documentation

Ensure that your official paperwork for incorporating in Pennsylvania includes all the necessary details, such as your nonprofit corporation's name, a duplicate file of your name reservation license, the number of members, information of the person submitting the initial form, relevant information of your corporation's registered agent, and details about the group of directors handling the initial board.

Once you've submitted the form, you must accompany it with a $100 check. The next steps involve sending it to the Secretary of State along with the License of Formation. This two-step document formation process typically takes one to two weeks in Pennsylvania.

What is an EIN and How to Get it

Every nonprofit corporation entering Pennsylvania must acquire an EIN, a Federal Tax Identification Number. This tax number serves the purpose of selecting representatives, setting up official bank accounts, and applying for tax-exempt statuses. In Pennsylvania, obtaining an EIN is a hassle-free process through preparing and filing a single form; the best part is that it's free.

Applying for Federal 501(c)(3) Status

Applying for federal 501(c)(3) status involves choosing between Form 1023 and Form 1023-EZ. Form 1023 is comprehensive but time-consuming, spanning 40 pages with a $600 filing fee. In contrast, Form 1023-EZ is a streamlined, three-page option costing $275, yet eligibility hinges on factors like annual gross receipts and asset values. Despite its efficiency, Form 1023-EZ carries risks, such as providing less assurance than the detailed Form 1023, potential reluctance from donors, and missed opportunities for understanding key nonprofit rules. 

Step 5: Set Up Your Nonprofit Bylaws

Ensure that your nonprofit bylaws align with Pennsylvania laws before submitting the articles of the organization. These bylaws govern meeting procedures, the selection of officers or directors, and other formalities, essentially serving as the operating manuals for your nonprofit corporation.

Step 6: Arrange an Initial Meeting

Now is the opportune moment to organize a few meetings to hash things out with the board of directors. This step towards initial meetings will aid in selecting the group of officers and directors for your corporation. Moreover, it facilitates the establishment of bylaws, the formulation of policies, and the finding of solutions. Your organization is responsible for documenting key points discussed in the meeting, serving as an official record of all crucial decisions made.

Step 7: File Your State Tax Exemption

Maintaining your tax exemption filing is crucial for your nonprofit corporation in Pennsylvania. This is because it shields you from incurring sales or income tax within the state. Once you receive the IRS association letter for your corporation, adhere to the state's requirements to secure your tax exemption status.

All the requirements for a nonprofit organization differ from county to county. Most states have their personalized exemption notices used for tax/sales purposes. For Pennsylvania, the Department of Revenue provides detailed information about tax exemption entities on its website.

Applying for Pennsylvania Tax Exemptions

To qualify for state sales tax exemption, entities need to fulfill the following steps:

1. Fill out and submit Form REV-72 to the Pennsylvania Department of Revenue- this form is a prerequisite for obtaining exemption from state sales tax.

2. Ensure timely renewal every five years to uphold your tax-exempt status. Be vigilant about adhering to renewal deadlines to prevent any lapses in exemption.

3. Simplify procurement processes by completing and submitting Form REV-1220 to vendors during purchases. This step informs vendors of your tax-exempt status, facilitating seamless transactions.

Stay updated on any state sales tax exemption procedure modifications to ensure continuous compliance with Pennsylvania regulations. Achieving and maintaining tax exemptions leads to cost savings and guarantees the efficient financial functioning of your nonprofit organization.

Maintaining Tax-Exempt Status and Compliance

In addition to state requirements, it's essential to annually complete and submit IRS Form 990 to the IRS. Form 990 provides detailed insights into your nonprofit organization's financial activities, ensuring compliance with federal regulations. This step is crucial for maintaining tax-exempt status and transparency at the federal level. Smaller nonprofit organizations may be eligible to submit the streamlined Form 990-N (e-Postcard) or Form 990-EZ, which involves less detailed reporting than the standard Form 990.

Step 8: Register in the Official State for Fundraising

The next step mirrors the previous one - registering for fundraising. Most states in the U.S. require annual donations for registration, with rules varying from one area to another and from state to state. For a nonprofit corporation in Pennsylvania, it's crucial to register in the official state, with requirements differing for various states, considering the organization's significance. Additionally, the state mandates submitting your corporation's yearly income tax report.

What if Your Nonprofit Corporation Has Multiple Branches

If your new nonprofit entity comprises several branches, each must have its own notice. This notice can be directed to the organization or attorney general, who will gather all pertinent documentation and file it with the general counsel. Therefore, enrolling in fundraising is a pivotal step.

Step 9: Apply for Licenses and Permits

Many new nonprofit organizations in Pennsylvania are required to obtain an official license. So, if you're planning to be one, securing a business license is crucial. Each state regulates this license in its own manner. Apart from the general corporation permit, several business-related licenses and allowances exist. You should acquire them to become a significant part of the state.

The U.S. has outlined some quick online reference guidelines for such licenses. For more insights, visit the website and assess whether you qualify. Moreover, specific areas in Pennsylvania, like Mobile, Montgomery, Huntsville, and Birmingham, have location-specific requirements and demand separate consents.

Step 10: Apply for an Insurance Policy

After obtaining a license for your nonprofit corporation, securing and applying for insurance at different levels is essential. Every new organization in Pennsylvania with its workforce is required to acquire two types of insurance policies:

1. The Unemployment Insurance Policy
2. The Workers' Compensation Insurance Policy

Both these policies fall under a broad range of requirements in the state. The Department of Labor's website also features official business pages for unemployment insurance and workers' compensation. Visit the website to understand the laws and the application process better. Regardless of the nature of your business, be it a nonprofit corporation or otherwise, you must comply with these policies to establish stability in the state. There are also liability and other business-specific insurances available, although acquiring them is not a legal necessity mandated by the state.

How to Keep Your Pennsylvania Nonprofit Compliant

Have a Pennsylvania Registered Agent

If you've incorporated your nonprofit in Pennsylvania, you need a registered agent with an office address in the state. 

Update any changes using Form DSCB:15-1507/5507/8625/8825 with the Secretary of State.

File Annual Reports

Starting in 2024, submit an annual report to the Department of State. No fee for nonprofit reports, but missing it could lead to your corporation getting the boot.

Navigate Fundraising Requirements

Charities seeking contributions might need to register with the Pennsylvania Department of State using form BCO-10. 

Exempt? Ask for an exemption with form BCO-9. More details in the Department of State's guidance and The Solicitation of Funds for Charitable Purposes Act.

Follow Public Inspection Rules for 501(c)(3) Organizations

If your organization has 501(c)(3) status, certain documents must be shared with the public when requested, like annual returns and exemption applications. Some info, like contributors' identities, doesn't need to be disclosed.

Once You Start a Nonprofit in Pennsylvania

Once your nonprofit has been established, there are subsequent steps to take:

Secure a Business Bank Account for Your Nonprofit Corporation

Obtain a business account for all your Pennsylvania nonprofit's transactions. Different banks and locations may require varying documents, so it's advisable to check with your chosen bank for specific requirements.

File Your Nonprofit Corporation as a Charity (Optional)

You have the option to file your nonprofit corporation as a charity, especially if it operates for charitable purposes or serves your community's needs. This step can enable your organization to enjoy tax exemptions.

Address Additional Business Compliances for Your Charitable Organization

Depending on your nonprofit's type, there might be additional compliance requirements. Seek guidance from your attorney or local authority for detailed information on any specific obligations.

List of Nonprofit Corporations in Pennsylvania

Here are some nonprofit organizations in Pennsylvania, and you can find their contact information on the official Pennsylvania Secretary of State (SOS) websites:

  • Quakertown Charities
  • Pottsville Charities
  • Pittsburgh Charities
  • Plymouth Meeting Charities
  • Pottstown Charities
  • Phoenixville Charities
  • Pittston Charities
  • Reading Charities

Elevate Fundraising with Paybee: A Comprehensive Solution for Pennsylvania Nonprofits

In addition to its cost-effectiveness, Paybee stands out as a comprehensive fundraising solution, offering a versatile suite of features that significantly enhance fundraising events for Pennsylvania nonprofits. This all-in-one platform includes essential functionalities such as ticketing, table management, auctions, raffles, smart bid paddles, bid sheets, scan check-in, auto-checkout, live displays, live streaming, and hybrid bidding. The versatility and depth of Paybee's features make it the most powerful and flexible fundraising event solution available- whether you're organizing a charity auction, community event, or virtual fundraiser, Paybee provides a seamless and efficient experience, empowering nonprofits to maximize their fundraising potential and achieve their philanthropic goals.

Frequently Asked Questions about Starting a Nonprofit in Pennsylvania

Why is Pennsylvania a favorable state for nonprofits?

Pennsylvania boasts over 77,860 nonprofits, generating $159 billion annually with significant assets.

What is the largest category of nonprofits in Pennsylvania?

Religious organizations lead with 11,096, followed by foundations (9,689) and educational institutions (8,771).

How can I start a nonprofit corporation in Pennsylvania?

Follow these general steps: Choose a name, appoint initial directors, select a registered agent, draft bylaws, file Articles of Incorporation, obtain a Tax ID, get licenses, apply for federal and state tax exemptions, and secure insurance.

What are the steps for choosing a name for my Pennsylvania nonprofit?

Consider the guidelines provided, ensuring the name is distinctive, and not associated with certain professions, educational institutions, financial institutions, or public utility companies. Conduct a business entity search and check web domain availability.

How long does it take to start a Pennsylvania nonprofit?

It takes 10-15 business days for Articles of Incorporation. IRS tax-exempt status varies from one month to six months. Check the Eligibility Worksheet for IRS determination time.

What documents and policies are essential for a Pennsylvania nonprofit?

Bylaws serve as the nonprofit management handbook, and a Conflict of Interest Policy is required to address conflicts that may arise. Both need to be reviewed, approved, and ratified during the first board meeting.

Why choose nonprofit corporations over LLCs in Pennsylvania?

Nonprofit corporations provide personal asset protection and eligibility for federal and state tax exemptions, offering advantages over nonprofit LLCs which lack tax benefits.

What types of nonprofits can I form in Pennsylvania?

In Pennsylvania, you have two main options for forming nonprofits. First, there's the Nonprofit Corporation, which benefits the general public or a large segment of it—think charities, schools, and museums. Second, you can go for a Nonprofit Cooperative Corporation, serving the interests of a specific group like food co-ops or employee unions.

How do I recruit board members for my Pennsylvania nonprofit?

Nominate an incorporator, select at least three directors, and nominate officers. Directors need to be natural persons of full age, not necessarily residents or members of the organization.

Is a registered office necessary for a Pennsylvania nonprofit?

Indeed, Pennsylvania mandates that nonprofits specify a registered office address or enlist the services of a commercial registered office provider in their articles of incorporation. The choice between them depends on your preference. 

A registered office refers to the Pennsylvania street address where the state can dispatch legal notices to your nonprofit. Opting for an address instead of a provider means you must provide a physical Pennsylvania address where someone is consistently available to receive service of process on behalf of your nonprofit, and this address becomes part of the public record.

What are the costs associated with launching a new nonprofit in Pennsylvania? 

Here's a breakdown:

Articles of Incorporation: This pivotal step incurs a fee of $125.

Incorporation Publishing: Approximately $200 is required for the associated publication.

Employer Identification Number (EIN): Obtaining this essential identification comes at no cost.

Application for federal tax exemption (501(c)): A fee of $275 or a $600 IRS fee is necessary for this crucial application.

PA-100: While the initial submission of this form is free, additional fees may apply for required licenses.

Pennsylvania Charitable Registration: Fortunately, this registration is usually exempt from charges, offering a financial benefit to eligible nonprofits.

What does the term "Pennsylvania Annual Report" refer to? 

It is an annual submission required by the Department of State, Bureau of Corporations and Charitable Organizations in Pennsylvania. Nonprofits can file for free, and beginning in 2025, it must be submitted before June 30th each year. 

Is it necessary for my Pennsylvania nonprofit to register as a charitable organization?

If your nonprofit in PA plans to gather charitable donations, it must register as a Pennsylvania charity through the Bureau of Charitable Organizations (a division of the PA Department of State). To do this, submit Form BCO-10, known as the Charitable Organization Registration Statement. 

Typically, the initial registration fee for your nonprofit is around $15, unless it has been active in other states. The renewal fee for your charity's registration depends on the total national contributions received annually by your Pennsylvania nonprofit.

Do nonprofits in Pennsylvania need business licenses?

No statewide business license is required. Depending on local requirements, nonprofits may need specific business licenses to operate certain events- like poker or bingo fundraisers- in Pennsylvania. Check with local government offices for details.

What is a Pennsylvania Decennial Report?

The Pennsylvania Decennial Report, or "Decennial Report of Continued Association Existence," is a means by which the state maintains your current contact details, affirming your business's existence under the same name. It serves as a public document, accessible online, providing notice to safeguard your entity's name rights. 

Since 2021, Pennsylvania law mandates that all types of entities, including corporations, non-profit corporations, LLCs, limited partnerships, LLPs, and business trusts, must file this report- the decennial report must be filed every ten years in a year ending with the numeral 1 (e.g., 2021, 2031). The deadline is Dec. 31 of the filing year- if needed, address changes can be updated within the report filing year.

Did You Find It Easy Forming a Nonprofit Corporation in Pennsylvania?

Forming and processing a nonprofit corporation in any U.S. state can sometimes feel intricate, but ignoring it is never an option! Numerous reputable sources, such as the Pennsylvania Association of Nonprofits, can aid you in forming your organization in Pennsylvania. After delving into the entire topic, you should now be well-acquainted with the essential steps in forming a corporation. If you ever need assistance with these points, the internet offers a wealth of knowledge. Platforms like Paybee can be particularly valuable for fundraising efforts, providing a seamless and efficient way for nonprofits to collect donations. Leveraging available resources is much easier than tackling it all on your own.

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Anastasia-Alexandra Nenova

Born and raised in South Africa, Anastasia-Alexandra is a Bulgarian writer and fighter. When she isn't writing, she's busy training or competing in Judo for South Africa. She's passionate about Judo where she is a 2nd Dan, other martial arts and fitness overall. Her dream is to qualify for the Olympic Games in Judo, and she's doing her best to turn that dream into reality.