Starting a nonprofit in Illinois
Starting a nonprofit organization in Illinois is governed by the “General Not For Profit Corporation Act of 1986” of Illinois. (Herein after called the ‘Act‘.)
For meaning of new terms used here – refer to Incorporation terminologies.
Scope of the Act – The Act is applicable to starting of public charitable organizations and private foundations.
As per Section 103.05 of this Act; the organizations established for any of the following purposes fall under its preview –
Agricultural,Athletic, Benevolent, Charitable, Civic, Crop improvement, Educational, Eleemosynary, Horticultural, Literary, Livestock or poultry improvement, Patriotic, Political, Professional, commercial, industrial, or trade association, Religious, Research, Scientific, Social, Soil improvement, Promoting the development, establishment/ expansion of industries and some other purposes. (see Sec. 103.05 for the entire list).
Eligibility for Incorporating a nonprofit in Illinois
1) Requires one or more incorporators. The incorporator may either be a natural person above the age of 18 or a domestic or foreign business entity.
2) Must have a valid street address ad its registered address of Illinois at any point of time. (Post box number not acceptable)
3) Must br represented by a ‘registered agent’ who is a resident of Illionis with a valid street address.
Steps involved in starting a nonprofit organization
Step 1) Deciding a name – Sec. 104.05 of the Act prescribes certain rules for choosing a name for a proposed non profit organization.
(a) The name should end with the abbreviation “NFP” if the corporate
name in any way tends to indicate a purpose other than those related to nonprofit activities or purposes beyond the scope of this Act.
(b) The name may or may not end with corporate designators like ‘corporation’, ‘company’, ‘limited’, ‘incorporated’ or their abbreviations.
(c) The proposed name should not leave scope for confusion with the name of any other corporation.
For more information about this, read: Naming a nonprofit organization.
Step 2) Preparing the Articles of Incorporation – As per the Illinios Act, the articles of Incorporation must include the following contents –
the name of the organization meeting the above requirements, the purpose clause from among the purposes mentioned above, the initial registered office address, the name and address of its initial registered agent at that registered office, the names and addresses of all the incorporators, the name address and number of initial directors.
Organizations started as clubs are additionally required to include an undertaking to comply with the provisions of “The Liquor Control Act of 1934” and other laws relating to liquor.
Similarly organizations which propose to act as condominium association, home owners associations are required to add certain special clauses. (Refer to the Act if your organization is likely to fall under this category)
Additional clauses desired in the Articles (Though not mandatory) – The articles of incorporation may additionally include an explanation of membership provisions (specifying if or not, membership would be allowed.
It can also include the duration for which the organization is being setup.(In case this is not mentioned – the duration is considered perpetual)
It may add any other legal clause that the incorporators feel would be required for managing and regulating the affairs of the corporation.
If an organization proposes to seek tax exemption recognition with the IRS, it must additionally include –
1) Dissolution Clause -Explaining how the assets of the organization would be treated in the event of its dissolution.
2) The organization might also like to include in this article the specific section (say section 501(c) (3) or any other section) under which the tax exemption recognition would be sought.
3) The organization may also include a clause restricting any activities not permissible by the IRS code as an additional clause.
The organization may choose to add the duties, powers, qualifications of all classes of members, directors,officers etc to either its Articles or later in its bylaws.
However it is advised to move all such non mandatory clauses to the bylaws as it provides more ease and flexibility in case you wish to modify any of them later.
To download the sample Article of Incorporation provided by the office of Secretary of State click here
To download a sample article of Incorporation for Illinois, click here.
Step 3) Execution of Documents
The final article of Incorporation should be typewritten or printed on white paper (one side only) in duplicate copies. Both the copies should then be signed in original on all pages by all the members of the Initial board of directors (if specified in the articles). If the initial board is not specified in the Articles, it should the be signed by all the incorporators.
The signer should also mention below all his signature, the capacity in which he is putting down his signature.
Filing fee – The Act prescribes a $50 fee for filing of articles of Incorporation.
Additionally $5 is payable for obtaining a ‘Certificate of Incorporation’. If the organization want a filed copy of the Articles of Incroporation, the applicable fee is $0.50 per page subject to a minimum of $5 per application.
The fee is payable by separate cashier’s check, certified check, money order or Illinois attorney’s or C.P.A.’s check payable separately for each of the amounts and is to be made in favor of “Secretary of State”
Step 4 – Filing for Incorporation
The articles of incorporation (in duplicate) needs to be mailed to or delivered in person for filing with the office of Secretary of State, Illinois at the following address –
Secretary of State
Department of Business Services
501 S. Second St., Rm. 350
Springfield, IL 62756
Online filing facility is currently not available for Nonprofit incorporation.
Step 5 – Obtaining Certificate of Incorporation – Upon successful filing, the secretary of state may either issue a certificate of incorporation (on payment of prescribed fee) or return a copy of the Articles stamping the word ‘filed’ on all its pages and signing on all pages (could be fascimile signature).
The nonprofit organization comes into a formal legal existence as a corporation on the date of successful filing.
Post Incorporation formalities
1) After successful filing of the articles of incorporation, the first meeting of the board of directors is to be held at the call of a majority of the incorporators by giving at least 3 days advance notice for the meeting –
The agenda of meeting as specified in the notice should include –
(a) Adoption of bylaws by the board
(b) Electing of officers such as president, secretary, treasurer etc
(c) Any other issue that is proposed to be taken up.
Instead of the meeting a written consent from the directors can also serve the same purpose as per the Act.
(2)This is to be followed by a meeting of the members (if the nonprofit has provision for admitting members.
Time required -The entire process can be completed in 3-5 days time ( within 8 hours in case you apply for expedited filing).
The time required for completing the incorporation primarily depends on your level of pre filing 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 at the time of starting a nonprofit because this will eventually govern how your nonprofit functions on a day to day basis.