Starting a nonprofit in Delaware

Starting a nonprofit in Delaware is governed by the The Delaware general corporation law. Unlike most of the other states, Delaware does not have a separate nonprofit corporation Act. (The bare law can be assessed at: http://delcode.delaware.gov/title8/c001/index.shtml)

Steps to Start a nonprofit organization in Delaware

1. Choosing a name for the proposed organization –  As per the Delaware laws – the name of the organization must include any one of the following corporate designators – Association, company, corporation, club, foundation,fund, incorporated, institute,society, Union, Syndicate, limited, Co, corp, Inc or limited. There are certain other important things to be kept in mind when choosing a name (Read: Choosing a name)

2. Eligibility for Starting

a) The organization must be represented by a ‘registered agent’ who must have a valid street address of Delaware (P.O Box no. not acceptable)

b) The proposed organization must have a valid  ‘registered address’ in Delaware.( Can be the same address as that of the rgistered agent)

c) The address of ‘primary place of business ‘ may or may not be located in Delaware.

d) The minimum number of directors required is 1. There is no upper cap on the number of directors that the orgnization can have.

3. Documents required for filing and starting the organization – (to be filed in duplicate)

a) Application form – The division of Corporation provides application format for various organizations. The application forms can be assessed at http://corp.delaware.gov/corpforms.shtml

or

Click here to download the application form for starting a tax exempt nonprofit organization in Delaware

b) Certificate of Incorporation (also called the Articles of Incorporation)- This the most important document that governs the regulation and management of the organization. As per Delaware laws, the certificate must include the following clauses – the name clause, the delaware address of the registered office and the name and address of the resident agent, the nature of activities proposed to be conducted, the class of shares to be issued (not applicable for nonprofits as they are not allowed to issue shares – ‘nonstock corporation’), the name and mailing addresses of incorporators, name and mailing addresses of each of the initial directors of the proposed organization.

Additionally the following clauses should be added in the Articles (Though not specifically required as per delaware laws) – The clauses creating, defining, limiting or regulating the powers of the corporation, its directors, members, governing body,  the membership provisions for the organization.

Additionally if the organization proposes to seek tax exemption under the federal or state laws, the certificate of Incorporation should include provisions which clearly specify the section under which the tax exemption would be sought. IRS, for instance requires two clauses to be inserted in the Certificate for claiming eligibility for tax exemption under section 501(c)(3)

To download a sample Article of Incorporation or Delaware Visit:

http://www.samplearticlesofincorporation.com/states.aspx

(copy and paste into a new browser)

c) Bylaws –While the Article of Incorporation deals with overall governance of the organization, the  bylaws provide information on policies governing the day to day operations of the organization. The provisions of the bylaw should not conflict with the provisions of the Article of Incorporation.

The legal requirements to be kept when drafting the bylaw are as follows –

a)  Directors quorum specifed in articles or bylaws should not be less than 1/3rd of the number in office.

b) Member’s quorum – 1/3rd of the voting members (if not otherwise specified in the organization’s bylaws)

For a sample Bylaw visit

http://www.mncn.org/info/samplebylawswoutmembers.pdf

(copy -paste into a new browser)

3. Document Execution – The Article and the bylaws (discussed above) need to be signed on all pages by all the members of initial board of directors. If the names of initital board members are not specified in the articles or the bylaws, the documents then need to be signed by the incorporator (s).

4. Where to file – The documents prepared as above need to be mailed to  the Secretary of State office, Corporation division, Delaware at the following address:

Express Mail Regular Mail
Division of Corporations
John G. Townsend Bldg.
401 Federal Street – Suite 4
Dover, DE  19901
Division of Corporations
PO Box 898
Dover, DE  19903

5. Filing Fee – The filing fee is collected by the Secreatry of state on behalf of the counties. The assessment fee payable at the time of Incorporation is $24 for 1-page instrument filed with the Secretary of State plus  $9 for each additional page to be filed.

The fee is payable through checks payable to the ‘Secretary of the State’

6. Commencement of Existence – Upon completion of the above formalites, the secretary of state returns one copy of the documents by suitably stamping it as ‘filed’ along with the date and time of stamping, under his actual, fascimile or printed signature.

The non profit organization thus comes into a formal legal existance.

Time required _ The entire process can be comepleted in less than 1 day , though a lot depends on your level of preparation.

Conclusion

A large number of people file these documents on their own. If you wish to outsource this part, there are several same-day incorporation service providers that can do this in your behalf. (You can search for them on the net).

Even if you decide to use the services of the professional ‘registered agents’, you should ideally draft your own articles and bylaws and have them ratified if needed by the service providers.

You should not let a third party draft them because this will eventually govern how your nonprofit functions on a day to day basis.