Starting a nonprofit in Louisiana
Starting a Nonprofit organization (NPO) in Louisina is governed by the Louisiana Nonprofit Corporation law. Title XII , Chapter 2 of the revized statutes.
Eligibility/Limitations on Starting a Nonprofit Organization in Louisiana
1) The Application for Incorporation must be moved by one or more Incorporators The Incorporator may be a natural person or a business entity and may or may not be a resident of Louisiana.
2) The incorporators must have a valid street address of Louisina for their registered address office. This may or may not be the principal place of business of the Nonprofit organization.
3) The NPO must be represented by a resident agent who should have a valid street address of Lousiana and must be generally available at the registered office address of the organization to receive notices, demands on behalf of the organization.
(See Incorporation terminologies for definition of all underlined terms)
Steps Involved in Starting a Nonprofit Organization in Louisiana
Step 1) Choosing a Corporate Name The Louisiana statutes presrcibe the following restricitons when choosing a name for Incorporating a nonprofit
a) The Proposed organization cannot have any of the following negative terms in its name – bank,banking,bankers, savings, trust, deposit, insurance, mutual, assurance, indemnity, casualty, fiducairy, homestead, ‘building and loan’, surety, security, guarantee, cooperative, state, parish, ‘redevelopment corporation’ ‘electric cooperative’ or ‘credit union’.
b) The Name may or may not include any corporate designators like ‘Corp.’, ‘Co.’, ‘Inc.’ etc.
c) The name cannot use the name of any public property along with any other words like “fund”, “benefit”,”foundation”, “benevolent”, “endowment” or “philanthropic”
d) The name should not be indicative a different purpose that what is intended to be undertaken by the Organization.
e) The Name may be in any language, provided it is reproduced in English (using alphabets and numbers) the Application form.
f) The name should not be the same or even sound similar (to the extent of being a possible cause of confusion) to the name of any existing business entity of Lousiana.
Click on the link to learn about the other considertations to be kept in mind when choosing a name for a Nonprofit organization.
Step 2) Obtaining a Federal Tax Identification Number (Also called the Employer Identification Number )
This is a simple exercise which can be completed online in a few minutes. This is a simple and a free registration with the Internal Revenue services.
For obtaining your Federal Tax identification number, click here.
Alternatively, one can apply manually by filling and submiting the Form SS-4 as prescribed by IRS.
For more information on this read “Applying for EIN ”
Obtaining this number is mandatory before one applies for Incorporation of a Nonprofit organization in Louisiana.
Step 3) Drafting of Articles of Incorporation
As per Louisiana Act, The articles of incorporation of a Nonprofit organization has to be drafted in English Language and must include the following clauses –
- The Name Clause – which mentions the name of the proposed organization. The name must meet the requirements described above
- The federal tax identification number of the proposed Nonprofit organization.
- The purpose(s) for which the proposed Nonprofit organization is being formed. After mentioning all the primary purposes, it is a good idea to mention on of the purposes as ” Undertaking of any legal activity”. Adding this sentence gives the Nonprofit organization an independence to expand its nature of acivities in the future without the need for amending the articles.
- The duration for which the Nonprofit organization is being formed. If this clause is not mentioned,the duration is considered to be perpetual
- A statement specifically mentioning that the propsoed organization would be a ‘Nonprofit organization’
- The names and street addresses of all the incorporators of the proposed NPO. (P.O Box addresses not acceptable as valid address in any of the clauses of the Articles)
- The name and address of the registered agent
- The Names, addresses and term of office of all the Initial directors of the organization
- Whether the organization will have provisions for admitting members or classes of members and various provisions related to admission, qualification, membership fee, voting powers, limitations, rights and duties of each class of members
- Additionally the Articles of incorporation may include any other clause that is desirable for effective regulation and management of the affairs of the organization
Clauses to be inserted for qualifying for IRS tax exemption recognition.
IRS mandates the addition of certain clauses to the Articles of Incorporation, If the NPO wishes to enjoy tax exemption recognition under any of its sections. These clauses are as follows –
1) The Purpose clause – already discussed above
3) The Dissolution clause – describing the method for treating the assets of the NPO in case of its dissolution
4) A clause mentioning the Section of the IRS code under which tax exemption is sought. (For e.g Section 501(c)(3) in case of public charitable organizations or Section 509 (a) for private foundations etc.)
5) A clause that specifically prohibits the NPO from engaging in any activity(ies) that are not allowed for a tax exempr organization.( For e.g lobbying/political affiliation etc.)
Using these directives, once can easily draft the Articles of incorporation for a NPO.
For a sample Article of incorporation for Louisiana click here
Step 3) Executing the Articles of Incorporation
The Final draft of Articles of Incorporation is to be printed in duplicate set on white blank sheet of paper (on one side only) and is to be signed by each of the Initial directors on all the pages, mentioning below each of the signatures, the capacity in which the Articles is being signed (Viz- “Director”)
The signature has to be applied in original on both the copies (One original and the other a conformed copy)
Step 4) Preparing other Documents
The Article of Incorporation must be accomapnied by 3 other documents –
A) A Transmittal Form – Click here to download the transmittal form as prescribed by the Secretary of Stae, Lousiana for this purpose.
B) A duly notarised affidavit of the registered agent. (Will have to get this notarised with the notary public in return for a very small fee)
C) A check of $60 towards filing fee payable favoring the “Secretary of state”
Where to File
All these documents duly completed must be delivered in person or mailed to –
Secretary of State
Baton Rouge, LA 70804-9125
Queries can also be raised at Phone (225)925-4704.
Birth of Organization – The Nonprofit organization comes into a formal legal existence in Kansas upon successful filing of the Articles of Incorporation with the Secretary of State, Kansas.
Post Incorporation formalities
Drafting of Organization’s Bylaws
The following important provisions of Lousiana statute must be kept in mind when drafting the organization’s bylaws –
- Number of directors – minimum 3 for membership corporations.
Can be less than 3 if the number of members is same as the number of directors.
- Director’s quorum – The directors quorum ia to be taken as specified in the bylaws or articles of Incorporation. The Act does not specify any quorum
- Director’s term of office – As specified in the articles but may not exceed 5 years. The term is to be taken as 1 year if not specified in the Articles or the bylaws. However section 229 requires annual meeting to be held for election of directors – hence it is best to keep it at one years.
- Officer’s requirement – The Nonprofit must appoint atleast three officers – (a)The president, (b) The Secretary and (c) The Treasurer.
- One person may hold two offices but if two signatures are required on a document, they should be signed by two separate signatories.
The bylaw must be adopted in the very first meeting that is to be convened immediately after the incorporation of the nonprofit organization.
Filing copies with the Recorder of Mortgages of the Pariah
Orginial copies or one certified copy of the filed Articles of Incorporation and a copy of certificate of Incorporation, must be filed with the recorder of mortgages of the Parish in which the registered office of the corporation is located, within 30 days of filing
Time required -The filing of Articles of Incorporation can can be completed in 3-5 days. ( The time is around 1 day if you pay an extra fee and apply for expedited filing).
The Filing process initself is a good learning for anyone planning to Form a Nonprofit organization as it makes him aware of the laws that will eventually govern the NPO.
This vital learning does not take place, if one decides to use the services of professional service providers for Incorporation besides saving considerably on the Incorporation cost.
Even if one decides to use the services of an incorporator, one should draft the articles of Incorporation and bylaws on his own.
These documents eventually govern the day to day affairs of the organization. It is therefore not advised to let outsiders draft them at the time of starting a nonprofit organization .