Starting a nonprofit in Iowa

Starting a nonprofit organization in Iowa and running it is governed The Revised Iowa Nonprofit Corporation Act, Chapter 504 of the Iowa code.

Applicability of the Act.

The provisions of this chapter are applicable to starting and managing of – (See: Types of Nonprofit Organizations)

1) Public benefit organizations

2) Mutual benefit organizations, and

3) Religious organizations.

Eligibilities for starting a nonprofit corporation

a) One or more person can be the incorporators of the proposed nonprofit organization. (Minimum 1, no upper cap on the number of incorporators)

b) Must be represented by a ‘registered agent’ – an Individual with a valid street address of Iowa (P.O box no. not acceptable). The registered agent has to sign an undertaking in the application accepting the responsibility to receive notices or demands on behalf of the nonprofit organization.

b) Must have a valid street address of Iowa for its registered office. (Can be the same address as the address of the registered agent.

See: Incorporation terminologies for glossary of Incorporation terms.

Steps Involved in starting a Nonprofit organization in Iowa

Step1) Choosing a Name – The Iowa code is not very specific about naming of nonprofits unlike many other states.

For instance the organization may or may not include a corporate designator like ‘Corp’, ‘Inc’,’Co.’ etc at the end of its name as is required by other states.

The name need not be in English. If the name is not in English , it should be reproduced in using English letters or Arabic or Roman numerals in the Application for Incorporation.

When choosing a name one must ensure that it does not indicate a different or a misleading purpose of the organization from what is stated in the Application.

The Act prohibits using the name of an existing Iowa corporation or even similar sounding names which could lead to confusion between two incorporations.

Several other factors that must be kept in mind when choosing a name can be assessed at:  Naming a nonprofit organization

Step2) Drafting the Articles of Incorporation

Mandatory clauses to be included in the Articles of Incorporation

As per the Act, the articles of Incorporation must include a corporate name for the corporation as per requirements mentioned above, the name an address of the initial registered agent and the address of its initial registered office , the name(s) and address(es) of all the incorporators of the organization, a membership clause which clearly specifies whether the organization will have one or more classes of members, a dissolution clause which explains the proposed process to be followed for distribution of Assets in the event of dissolution of the nonprofit organization.

Optional Clauses

Additionally the articles of Incorporation  may include the purpose(s) of the nonprofit organization, the names and addresses of the the initial directors and any other provision for managing or regulating the day to day conducting of its affairs inlcuding qualifications, powers and duties of directors, officers and members. The Articles may additionally an include an indemnification clause.

Clauses for IRS tax exemtion

There are  certain clauses that must be included in the Articles of Incorporation, if the nonprofit organization proposes to seek tax exemption recognition with the IRS. The clauses that are desirable for meeting IRS requirements are –

1) The Name Clause – which mentions the name of the organization.

2) The Purpose clause – which includes the primary purposes for which the orgnization is being instituted. It is a good idea to include a last clause stating the purpose as “any lawful activity” to keep scope for adding new scopes as the organization matures and builds new perspectives.

3) The Dissolution clause – explaining the process of distributing assets in the event of dissolution of the nonprofit organization in future.

4) A clause which specifically mentions the section of the IRS code under which tax exemption would be sought (Say under section 501(c)(3).

5) A clause specifically prohibiting the organization from undertaking any activity(ies) that are not allowed by the IRS for a tax exemption seeking organizations. (e.g lobbying/political affiliation etc.)

To download a sample article of Incorporation for Iowa, Click here.

Step 3) Executing the Articles of Incorporation

Two sets of Articles of incorporation (one original and one conformed copy) must be type written or printed in English on white sheet of bond paper (one side only) and must be signed on all pages by the presiding officer of the board of directors as mentioned in the Articles of Incorporation. If names of initial directors has not yet been decided or not mentioned in the Articles, then it is to be signed by an incorporator.

The signatory must also mention his designation(the capacity in which he/she is signing)below each signature.

The signatory must sign originally on both the original and conformed copy of the Articles of Incorporation. (Copy of signature on the second copy is not acceptable).

Step 4) Filing the Articles of Incorporation

Filing Fees – The filing fee currently payable are –

$20 for filing of Articles of Incorporation for domestic organizations(mandatory)  {$25 for foreign nonprofit corporations}

$10 for reserving name in advance. (optional)

$5 for obtaining Certificate of Existance (optional but recommended)

The fee is payable vide separate checks made payable to the “Secretary of State”

Where to File

The Articles along with the check(s) for the  requisite fee must be signed and delivered at –

First Floor, Lucas Building
321 E. 12th St.
Des Moines, IA 50319
515-281-5204
515-242-5953 (Fax)

Any clarifications/queries can be discussed at the above conact numbers or they can be mailed at  [email protected]

Online filing is not available in Iowa.

Birth of Organization – The Nonprofit organization comes into a formal legal existence as soon as the Articles are signed by the secreatry of state (in original or fascimile) and stamped with the words ‘filed’ by the office of the Secreatry of State, Iowa.

Proof of Successful filing – The Secreatry of state, Iowa may issue a “Certifcate of Existence” under his orginal or fascimile signature upon payment of the stipulated fee.

Post Incorporation formalities

Drafting of Organization’s Bylaws

The following important provisions of the Act must be kept in mind whe drafting the bylaws –

1) Director’s Quorum- Not less than 1/3rd of directors in office or else as specified in the articles or the bylaws.

2) Member’s Quorum – As stated in the articles or bylaws. If not stated – atleast 1/10th of the total votes must be represented in the meeting. If voting to be conducted on any matter which has not been served in the notice of the meeting then atleast 1/3rd of voting power must be represented (either in person or proxy)

3) Director’s term of office – Term to be fixed as per articles provision but should not exceed 5 years.

Adoption of Bylaws

After the Articles of Incorporation has been successfully filed with the Secretary of State, Iowa – the initial board of directors (or the incorporators) must call for the first organizational meeting by sending a notice of the meeting to all the board members.

The meeting must first  elect the initial directors (if not already decided and mentioned in the Articles).

This is to be followed by –

a) Adoption of the first bylaws of the newly formed NPO.

b) Appointment of Officers – like president,secretary, treasurer, Vice presidents, CEO depending on the specific functions to be undertaken by the newly formed NPO.

c) Any other issue that the board may decide to take up.

Time required -The entire process of Incorpoation can be completed in 3-7 days time ( within 1 day in case you apply for expedited filing).

The time required for completing the incorporation primarily depends on your level of pre filing preparation.

Conclusion-

These days many individuals file for Incorporation on their own. If you wish to outsource the incorporation procedure, there are many incorporation service providers that will provide this service. (Fee varies widely). (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.

Starting a nonprofit organization in Iowa and running it is governed The Revised Iowa Nonprofit Corporation Act, Chapter 504 of the Iowa code.

Applicability of the Act.

The provisions of this chapter are applicable to starting and managing of – (See: Types of Nonprofit Organizations)

1) Public benefit organizations

2) Mutual benefit organizations, and

3) Religious organizations.

Eligibilities for starting a nonprofit corporation

a) One or more person can be the incorporators of the proposed nonprofit organization. (Minimum 1, no upper cap on the number of incorporators)

b) Must be represented by a ‘registered agent’ – an Individual with a valid street address of Iowa (P.O box no. not acceptable). The registered agent has to sign an undertaking in the application accepting the responsibility to receive notices or demands on behalf of the nonprofit organization.

b) Must have a valid street address of Iowa for its registered office. (Can be the same address as the address of the registered agent.

See: Incorporation terminologies for glossary of Incorporation terms.

Steps Involved in starting a Nonprofit organization in Iowa

Step1) Choosing a Name – The Iowa code is not very specific about naming of nonprofits unlike many other states.

For instance the organization may or may not include a corporate designator like ‘Corp’, ‘Inc’,’Co.’ etc at the end of its name as is required by other states.

The name need not be in English. If the name is not in English , it should be reproduced in using English letters or Arabic or Roman numerals in the Application for Incorporation.

When choosing a name one must ensure that it does not indicate a different or a misleading purpose of the organization from what is stated in the Application.

The Act prohibits using the name of an existing Iowa corporation or even similar sounding names which could lead to confusion between two incorporations.

Several other factors that must be kept in mind when choosing a name can be assessed at:  Naming a nonprofit organization

Step2) Drafting the Articles of Incorporation

Mandatory clauses to be included in the Articles of Incorporation

As per the Act, the articles of Incorporation must include a corporate name for the corporation as per requirements mentioned above, the name an address of the initial registered agent and the address of its initial registered office , the name(s) and address(es) of all the incorporators of the organization, a membership clause which clearly specifies whether the organization will have one or more classes of members, a dissolution clause which explains the proposed process to be followed for distribution of Assets in the event of dissolution of the nonprofit organization.

Optional Clauses

Additionally the articles of Incorporation  may include the purpose(s) of the nonprofit organization, the names and addresses of the the initial directors and any other provision for managing or regulating the day to day conducting of its affairs inlcuding qualifications, powers and duties of directors, officers and members. The Articles may additionally an include an indemnification clause.

Clauses for IRS tax exemtion

There are  certain clauses that must be included in the Articles of Incorporation, if the nonprofit organization proposes to seek tax exemption recognition with the IRS. The clauses that are desirable for meeting IRS requirements are –

1) The Name Clause – which mentions the name of the organization.

2) The Purpose clause – which includes the primary purposes for which the orgnization is being instituted. It is a good idea to include a last clause stating the purpose as “any lawful activity” to keep scope for adding new

3) The Dissolution clause – explaining the process of distributing assets in the event of dissolution of the nonprofit organization in future.

4) A clause which specifically mentions the section of the IRS code under which tax exemption would be sought (Say under section 501(c)(3).

5) A clause specifically prohibiting the organization from undertaking any activity(ies) that are not allowed by the IRS for a tax exemption seeking organizations. (e.g lobbying/political affiliation etc.)

To download a sample article of Incorporation for Iowa, Click here.

Step 3) Executing the Articles of Incorporation

Two sets of Articles of incorporation (one original and one conformed copy) must be type written or printed in English ( if filing is done manually by delivering the articles to the Secretary of State in person – Not applicable for online filing) on white sheet of bond paper (one side only) and must be signed on all pages by the presiding officer of the board of directors as mentioned in the Articles of Incorporation. If names of initial directors has not yet been decided or not mentioned in the Articles, then it is to be signed by an incorporator.

The signatory must also mention his designation(the capacity in which he/she is signing)below each signature.

The signatory must sign originally on both the original and conformed copy of the Articles of Incorporation. (Copy of signature on the second copy is not acceptable).

No such execution required in case of E-filing of documents.

Step 4) Filing the Articles of Incorporation

Filing Fees – nd any franchise tax, license fee, or penalty, shall be paid in a manner permitted by the secretary of state.

Where to File

Birth of Organization – The Nonprofit organization comes into a formal legal existence as soon as the Articles are signed by the secreatry of state (in original or fascimile) and stamped with the words ‘filed’ by the office of the Secreatry of State, Iowa.

Proof of Successful filing – The Secreatry of state, Iowa may issue a “Certifcate of Existence” under his orginal or fascimile signature upon payment of the stipulated fee.

Post Incorporation formalities

Drafting of Organization’s Bylaws

The following important provisions of the Act must be kept in mind whe drafting the bylaws –

1) Director’s Quorum- Not less than 1/3rd of directors in office or else as specified in the articles or the bylaws.

2) Member’s Quorum – As stated in the articles or bylaws. If not stated – atleast 1/10th of the total votes must be represented in the meeting. If voting to be conducted on any matter which has not been served in the notice of the meeting then atleast 1/3rd of voting power must be represented (either in person or proxy)

3) Director’s term of office – Term to be fixed as per articles provision but should not exceed 5 years.

Adoption of Bylaws

After the Articles of Incorporation has been successfully filed with the Secretary of State, Iowa – the initial board of directors (or the incorporators) must call for the first organizational meeting by sending a notice of the meeting to all the board members.

The meeting must first  elect the initial directors (if not already decided and mentioned in the Articles).

This is to be followed by –

a) Adoption of the first bylaws of the newly formed NPO.

b) Appointment of Officers – like president,secretary, treasurer, Vice presidents, CEO depending on the specific functions to be undertaken by the newly formed NPO.

c) Any other issue that the board may decide to take up.

Time required -The entire process of Incorpoation can be completed in 3-7 days time ( within 1 day in case you apply for expedited filing).

The time required for completing the incorporation primarily depends on your level of pre filing preparation.

Conclusion-

These days many individuals file for Incorporation on their own. If you wish to outsource the incorporation procedure, there are many incorporation service providers that will provide this service. (Fee varies widely). (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.