Starting a nonprofit in Kentucky
Starting a Nonprofit organization in Kentucky is governed by the private corporations and association section of the Kentucky statutes (Title XXIII, Chapter 273) (Revised Act effective from Jan1,2011)
Eligibility for Starting a Nonprofit Organization in Kentucky
1) The NPO must have a valid street addrress of Kentucky for its registered office address. (P.O Box numbers are not acceptable)
2) The NPO must be represented by a ‘registered agent‘ – a person who is generally available at the registered office to receive notices/demand on behalf of the organization.
3) The ‘registered-agent’ may be a natural person or a business entity.
4) The registered office address may or may not be the principal place of business for the Nonprofit organization.
5) The Minimum number of directors required for starting a Nonprofit corporation is 3.( No upper cap provided by the Act)
Steps for Starting a Nonprofit organization in Kentucky
Step1) Choosing a Name
The Act specifies certain guidelines for choosing a name for a Nonprofit organization –
1) The name of the NPO must be followed by a corporate desingators – ‘Corporation’, ‘Incorporated’, ‘Company’, ‘Limited’ or an abbreviaqtion of these words like ‘Corp.’ ‘Inc.’ ‘Ltd’ or ‘Co.’. Additionally if a Nonprofit organization decides to use the word ‘Company’ or ‘Co.” the designator cannot be immediately preceeded by ‘and’ or ‘&’.
2) The Name should not be indicative of a different purpose than the prupose(s) for which the organization is formed.
3) The Entity can use the designator ‘Cooperative’ only of it being instituted as a cooperative and is complying with the requirements for starting a cooperative as defined in the sections 272.020 to 272.050 of the KRS.
4) The Name should not be the same or even sound similar to the name of any other entity operating in Kentucky. Online Name Search facility provided by the Secretary of States can be used to verify this.
5) The name need not be in English, provided it is reproducedusing
English letters or numbers in the Application.
6) The Act also provides for the facility of reserving names in advance, use of ‘fictituous names’ and use of ‘assumed names’ but we will not get into the details of these for the sake of sticking to the topic.
Besides these, there are some other factors to be kept in mind when choosing a name. (Read: Naming a Nonprofit organization)
Step 2) Drafting the Articles of Incorporation
As per the Act, the Articles of Incorporation must include the following clauses –
(a) The proposed name of the NPO meeting the requirements as mentioned above.
(b) The purpose (s) behind forming the Nonprofit organization.
(c) A valid mailing address of the organization’s principal office.
(d) The number, names and mailing addresses of all the initial directors of the NPO
(e) The name and mailing address of all the incorporator(s).
Optional Clauses in the Articles of Incorporation
As per Kentucky Statute, The Articles of incorporation might include –
(a) Duration clause – Specifying the life of the proposed organization. If nothing is mentioned in the Articles, the organization is presumed to have a perpetual legal existance.
(b) Dissolution Clause – The articles of Incorporation might include a dissolution clause which explains the proccess to be followed for distribution of Assets in case it is decided to wind up the organization.
(c) Membership Clause – Specifying whether the organization will have provisions for admitting a class or classes of members.
(d)Any other provision that governs the regulation and management of the Nonprofit organization, including qualifications,eligibility, duties and powers of the board of directors,officers or any other class of members.
(e) The Articles may or may not mention any of the corporate powers already mentioned in the 273.163 to 273.387 sections of KRS.
(f) The Articles of Incorporation may include any other provisions for managing the affairs of the organization which are consistent with the Kansas Statute.
(g) A clause speciying that the organization’s initial registered office and initial registered agent are in accordance with requirements of KRS 14A.4-010.
Mandatory Articles of Incorporation Clauses for obtaining IRS tax exempt recognition
If a nonprofit organization wishes to seek tax exemption recognition with the IRS, it must consider adding the following clauses in the Articles of Incorporation:
1) The Purpose Clause(s) which should include the purposes for which the organization is being formed. It can also be a general statement that reads as “conducting of any lawful activity”
3) The Dissolution clause which describes the systems to be followed for distribution of assets, in case od dissolution of the nonprofit organization.
4) A clause mentioning the exact section of the IRS code (Say under section 501(c)(3) in case of public charitable organizations, Section 509 (a) for private foundations ) under which IRS tax exemption will be applied for.
5) A clause specifically prohibiting the members of the nonprofit organization from undertaking any activity(ies) that are prohibited by IRS for organizations that seek IRS tax exemption. (e.g lobbying/political affiliation etc.)
To download a sample NPO Article of Incorporation for Kentucky, click here
The sample Article of Incorporation for Kentuck NPO format provided for Incorporating a nonprofit by the secretary of states, Kentucky can be downloaded by clicking on the above link.
Using the two samples provided above one can easily draft an Article of incorporation.
Step 3) Executing the Articles of Incorporation
The Kentucky Act prescribes that the Articles of Incorporation must be printed or type written on balnk sheet of paper(s) (one side only) and signed on all page by –
The Presiding memmber of Initial board of directors or all the members of the Intial board of directors.
If the names and addresses of all the Intial board members has not yet been finalized and hence not mentioned in the Articles of Incorporation, the Article must then be signed by the incorporator(s) of the Nonprofit organization.
Additionally, the registered agent must sign accepting his appointment on the acceptance column of the Articles of Incorporation. The acceptance may also be annexed thorough a separate letter to the Articles of Incorporation.
Step 4) Filing the Articles of Incorporation
Filing fee – The current filing fee payable for filing of Articles of Incorporation for a non-profit corporation is $8.00.
This is payable through a check made favoring the “Kentucky State Treasurer.”
Where to file – Duly completed Articles of Incorporation, Acceptance of the incorporator and the check for Filing fee should be either
Mailed to –
Office of the Secretary of State
P. O. Box 718
Frankfort, KY 40602-0718
or Delivered in person at –
Room 154, Capitol Building
700 Capital Avenue
Frankfort, KY 40601
Hours of Operation: 8:00 AM-4:30 PM ET
Queries if any can be discussed at – 502-564-3490
Birth of Organization – A nonprofit organization comes into a formal legal existence, when the office of Secretary of State receives the above application, scrutnises it and then stamps the word ‘filed’ on all the pages of the Articles of Incorproation along with a signature (in original of fascimile) of the Secetary of State, Kentucky.
The Secretary of State may also issue a duplicate copy of the Articles or a separate ‘Certificate of Existance’ as an evidence of the formal incorporation.
Step 5) Post Incorporation formalities
Drafting of Organization’s Bylaws
The following important provisions of the Kentucky statute must be kept in mind when drafting the organization’s bylaws –
a)Minimum number of directors required is 3.
b)Director’s quorum – As specified in articles or bylaws – no quorum specifed by law.
c)Member’s quorum – If not specified in the bylaws then 1/10th of voting members.
d)Directors term – If not specified then taken as 1 year. Nothing specified in law.
e) Officer’s terms – As specified in the bylaws with maximum of 3 years . If no provision given in the bylaws then officers to be elected annually.
Filing with the County clerk
Additional requirements – stamped copy of articles filed with secretary of state must also be filed with the county clerk of the county where the registered office is situated.
Time required –
Incorporation of Nonprofit can be completed in 3-7 days time ( within a day in case one applies and pays for expedited filing).
The time required otherwise primarily depends on the time you take to complete these pre filing activities like choosing a name, drafting and executing the articles and other activities outlined above.
One can form a Nonprofit organization without actually taking the services of any outside agency.
If however one wishes to outsource the incorporation procedure, he/she can avail the services of several professional registered agents on incorporation service providers in return of a fee. The fee charged by these agencies vary widely. (You can search for them on the net).
Incorporating on ones own offers certain great learning experience and can be tried.
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 your articles or bylaws at the time of starting a nonprofit organization as these documents eventually govern how your nonprofit functions on a day to day basis.