Information on Forming Non-Profit Organizations
*Note: The Office of the Secretary of State cannot provide legal advice or interpretation of federal or Kentucky law to the public. If you need legal advice, please consult a qualified lawyer.
Choice of Entity
Before beginning any filing or drafting, persons wishing to form a nonprofit organization must choose whether to define the organization as unincorporated nonprofit organization, incorporated nonprofit organization, or a limited liability company (LLC). The choice of entity may be based on future expectations and organizational goals and is the basis for all future operations.
A corporation has power to enter a contract. This power renders the corporation liable for the acts of the organization as a whole, its directors, officers, and employees. Any nonprofit corporation may sue, be sued, complain and defend in the corporate name.
The corporation may indemnify any current or former director or officer against reasonably incurred expenses in defense of any action in which he is made a party by reason of his position with the corporation, unless his actions constitute negligence or misconduct. The articles of incorporation may eliminate or limit the personal liability of a director for monetary damages resulting from his breach of fiduciary duty unless the breach involves a conflict of financial interest, bad faith, or improper personal benefits. Directors, officers, trustees, employees and members are not personally liable for the obligations of a tax-exempt organization as long as they receive no compensation for their services. Nonprofit organizations may also purchase liability insurance to cover officers, trustees, employees and volunteers.
For information regarding the extent of liability applicable to unincorporated organizations, incorporated organizations, and LLCs, please consult a qualified lawyer.
Kentucky defines a “nonprofit” corporation as a corporation no part of the income or profit of which is distributable to its members, directors or officers (KRS §273.161). All nonprofit organizations formed within the state of Kentucky are governed by KRS Chapter 273: Nonstock, Nonprofit Corporations. The sections of this chapter provide information on the purposes for which a nonprofit corporation may be formed, general powers, and requirements for formation, as well as provisions for subsequent changes and modifications to the organization.
To begin, all nonprofit organizations must file articles of incorporation with the Secretary of State’s office. The articles of incorporation include the corporation’s name, statement of purpose, initial registered office, initial registered agent who is designated to receive service of process, mailing address, and board of directors who will manage the affairs of the corporation. The articles of incorporation may also limit the directors’ liability for monetary damages from breach of duty. Instructions for filing the articles of incorporation are attached to the end of the form itself.
Please note that the form supplied by the Secretary of State does not comply with federal 501(c) status (see “Federal Level” section below). Contact the IRS before filing the articles of incorporation to prevent any conflicts.
Nonprofit corporations are required to continuously maintain a registered office and registered agent. Any change in the registered office or registered agent must be filed with the Secretary of State in accordance with KRS provisions.
All necessary forms are available at the Secretary of State’s business filings office webpage, or by contacting the Secretary of State Business Filings office at PO Box 718, 700 Capitol Avenue, Suite 154, Frankfort, KY 40601 or by phone at (502) 564-3490, or by email. A list of filing fees for all forms is also available. The Secretary of State’s website also includes answers to business filings FAQs.
Any document filed with the Secretary of State must be typewritten or printed in English. If the Secretary of State has prescribed a mandatory form for the document, the document must be in or on the prescribed form. Documents filed with the Secretary of State are processed the day they are received, but the process may take up to 3 business days. The only exception to this time period is the annual report.
Nonprofit organizations must file at the national level with the IRS. Basic tax information on charities and nonprofits can be found at the IRS charities and nonprofits webpage. This provides information on the “life cycles” of public charities and private foundations, as well as applicable tax codes and requirements for receiving tax-deductible contributions.
Information on obtaining tax-exempt status is available from the IRS through publication number 557, “Tax Exempt Status for Your Organization”. This publication is available in .pdf format on the IRS website, or by writing to the IRS Forms Distribution Center, PO Box 8903, Bloomington, IL 61702-8903 or by calling the IRS at (800) 829-FORM.
Answers to frequently-asked questions are available at IRS Frequently Asked Questions about Tax-Exempt Organizations. This website includes:
1. FAQs about Applying for Tax-Exemption
2. FAQs regarding the Annual Reporting Requirements for Exempt Organizations
3. FAQs regarding Operating as an Exempt Organization
4. FAQs regarding General Issues of Interest
5. FAQs about the Exempt Organization Public Disclosure Requirements
6. FAQs regarding the Annual Form Filing Requirements for Section 257 Organizations (Political Organizations)
7. FAQs – E-file for Charities and Nonprofits
8. FAQs about Charitable Organizations Providing Disaster Relief
If you plan to form a tax-exempt organization, please consult the tax-exempt organizations reference chart to help you determine under which section of the tax code you should file. The chart also contains links to applicable forms and information on what kinds of contributions that organizations may receive. Many forms are extremely detailed and complicated, so you may wish to consult a tax advisor.
Forms and Payment
The IRS website for exempt organizations forms and publications includes a packet of federal forms and publications for tax-exempt organizations, tax law training articles, filing tips, and questions and answers about the application process for recognition of exemption for federal income taxation. Selected IRS Forms (in .pdf format) and instructions for filling them out can also be found at the following links:
· Form 990: Return of Organization Exempt from Income Tax [Instructions]
· Form 990EZ: Short Form Return of Organization Exempt from Income Tax [Instructions]
· Form 990BL: Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons
· Form 990C: Farmers' Cooperative Association Income Tax Return [Instructions]
· Form 990 PF: Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation [Instructions]
· Form 1023: Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code [Instructions]
· Form 1024: Application for Recognition of Exemption Under Section 501(a) for Determination Under Section 120 of the Internal Revenue Code
· Form 1028: Application for Recognition of Exemption Under Section 521 of the Internal Revenue Code [Instructions]
· Form 8718: User Fee for Exempt Organization Determination Letter Request
· Publication 557: Tax-Exempt Status for Your Organization
E-file and electronic payment options are available here.