Forming a new organization can be an important and fulfilling means of meeting a public need.  However, sustaining a successful nonprofit is a challenging undertaking under the best of circumstances, and it may not always be necessary or appropriate to start a new group. Before deciding whether to proceed, you’ll want to have a full understanding of what is required and the various alternatives to nonprofit start-up that could accomplish your goals.

BEFORE you begin the legal process in New Jersey:

• Read carefully the Center’s “Thinking of Forming a Non-Profit?” booklet (available in English & Spanish; Spanish update coming soon). Also see the New Jersey Division of Taxation web page, “Starting a Non-Profit in New Jersey: Questions and Answers.”
• Have a clear idea of the problem you want to solve.
• View Pro Bono Partnership’s on-demand webinar – “Starting a Nonprofit: Upsides, Downsides and Alternatives.”
• Do some thorough research to find what organizations exist that already work on the problem you want to solve. What activities do they do? What efforts have succeeded / failed in addressing my focus area? Can you partner with them, perhaps conduct a project within their existing framework?
• Identify the resources you have to create a viable organization – finances, skills, time, access to supporters, etc.
• Consider whether your cause would be best served by contributing to or working with an existing organization since that will save you the time and money needed to establish a separate organization.
• The Center has created a free self-assessment tool that you can complete with prospective board members to help you determine if you are ready to start up. We recommend that you respond to these questions honestly and to the best of your ability. Although detail is not needed here, it will be important later as you go through the process of formation.
• If you’ve already started the process, view Pro Bono Partnership‘s on-demand webinar series, “Legal Issues for New Nonprofits” geared towards new organizations that recently received their 501(c)(3) status, as well as smaller nonprofits (for example, nonprofits that file IRS Form 990-N). These webinars explain many of the rules and best practices for maintaining your organization’s tax-exempt status. 

Not in New Jersey? If you are thinking of forming an organization outside New Jersey, you may want to contact one of the other state associations that is part of the National Council of Nonprofits network for more information on your state regulations.

A Brief Outline of the Incorporation/Tax Exemption Process

To incorporate your organization as a nonprofit in New Jersey, you must file a Certificate of Incorporation with the NJ Department of the Treasury, Division of Revenue. You can expect to pay $115 for this, which includes the filing fee, expedited service (to speed up the turnaround time for filing your Certificate; applies only to over-the-counter transactions), and the return of a certified, stamped copy of your certificate for your files.

On the federal level, the IRS will want more information in your organizational documents than is required by the State of New Jersey for state-level nonprofit status. Therefore, the State forms alone are not sufficient if you want to pursue federal tax-exemption from the IRS. You will also need to develop bylaws and have them adopted by your Board of Trustees. You will also need:

• SS-4 – Employer Identification Number
• Form 1023 – Application for Recognition of Exemption or Form 1023-EZ – Streamlined Application for Recognition of Exemption (Form 1023 or Form 1023-EZ if seeking tax exemption under Section 501(c)(3); Form 1024 for other types of exempt organizations)
  • As of January 5, 2023, the fee for filing Form 1023 is $600. The fee for filing Form 1023-EZ is $275. You can only complete a Form 1023-EZ if you qualify in accordance with the Form 1023-EZ Eligibility Worksheet. (Even if you are eligible to use 1023-EZ, please exercise caution if you are considering using it.)
  • The IRS requires that Form 1023 or Form 1023-EZ be completed electronically at Pay.gov.
• Publication 557 – Tax-exempt Status for Your Organization

These and other IRS forms commonly used by exempt organizations are available online from the IRS Web site at www.irs.gov/app/picklist/list/formsPublications.html. The IRS site also provides important information about a wide variety of tax-exempt topics http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations.

There are also a number of reporting requirements that must be adhered to after your organization is up and running.

For more information about some common State of New Jersey and IRS filings, also see:

• State of NJ www.state.nj.us/treasury/taxation/exemptintro.shtml and www.nj.gov/treasury/revenue/pdf/Notice-Filing-Fees7-1-19-r4.pdf.
• IRS www.irs.gov/charities-non-profits/annual-filing-and-forms.