Starting a Nonprofit in Maine
Starting a Nonprofit organization in Maine is governed by Maine Nonprofit Corporation Act and is applicable to starting of Public Charitable organizations and mutual benefit organizations. (See :Types of Nonprofit organization )
Scope of the Act
The Act is Applicable to starting of both Domestic and Foreign Nonprofit corporations and covers organizations involved agricultural, animal husbandry,athletic, Charitable, civic, cultural, eleemosynary, educational, fraternal, home owner’s association of dfferent kinds literary, patriotic, political, social, scientific and horticultural practices. It also covers the formation and management of collective bargaining, commercial, industrial, Professional trade association.
The Act is not Applicable to starting of Churches and Cooperative organizations.
Eligibility for Starting A Nonprofit Organization in Maine as per the Act
1. Minimum number of directors for a NPO is 3. Further 49% of directors on board should not be ‘financially interested’ persons. *An individual who has received or is entitled to receive compensation for personal services rendered to the corporation by that Individual within the previous 12 months is a financially interested person. The relatives of such person are also included as Fiancially inerested person.
2) Valid Street address of Maine – A nonprofit organization must have a valid street address (Not P.O Box number) of Maine as its registered address.
3) Resident Agent – The registered address, must have a person generally staying their, who is to be appointed as the resident agent of the Nonprofit organization. This person is responible for receiving all notcies, letters and demands on behalf of the Organization.
Steps Involved in Starting a Nonprofit organization in Maine
Step 1) Choosing a Name – The Maine Act prescribes certain guidelines for Choosing a corporate name for a Nonprofit organization. The Important guidelines are as follows –
a) The Name should not be indicative of a purpose other than the purpose for which the organization is being instituted.
b) The name does not need to be followed by corporate deisgnators like Inc., Corp, Co. etc unlike the requirement in many other states.
c) The Name must be distinguishable from the names of other business entities operating in Maine. Same or similar sounding words that could be a cause of confusion between two entities is not accepted by the Seretary of State. A name availability check can be conducted online at the website of Secretary of States, Maine.
Click here to learn how to choose a name for a Nonprofit organization.
Step 2) Drafting the Articles Of Incorporation
As per the Maine Act, the articles of incorporation must include the following Clauses
1) The name of the corporation as per requirements discussed above.
2) A statement clarfying whether the proposed nonprofit organization is a public benefit or a mutual benefit corporation.
3) The Purpose or purposes for which the said organization is being formed. It is a good idea to add the last purpose in this section as ‘Undertaking of any activity and purposes permitted under the Act’. Inserting this clause enables the Nonprofit organization to venture into new segmennts in fututre without the need for amending the Articles of Incorporation.
4) The number,names and addresses of all the initial directors of the porposed organization. The Articles may also fix the minimum (not less than three) and maximum number of directors, if desired.
5) The names and addresses of each incorporators of the proposed Nonprofit organization.
6) A membership clause – Which mentions whether the NPO will or will not have members (or classes of members) If the NPO will have members, the classes of membership, qualifications of members and the manner of election or appointment and the rights of the members of each class must be included in the articles of incorporation.
Additionally the Article of Incorporation may include any other matter related to the regulation and management of the affairs of the organization, as desired.
Clauses required for IRS tax exempt recognition
If a NPO plans to obtain tax exemption recognition with the IRS, it must consider adding the following clauses in the Articles of Incorporation as per IRS directives:
1) The Purpose Clause(s) – already discussed above.
3) The Dissolution clause which describes the proceeses for distribution of assets, in case it is decided in future to dissolve of the nonprofit organization.
4) A clause specifying the exact section of the IRS code under which IRS tax exemption will be applied for.( It is generally Section 501(c)(3) in case of public charitable organizations, Section 509 (a) for private foundations ) (See IRS Clauses for more details)
5) A clause that restricts the nonprofit organization from undertaking any activity(ies) prohibited by IRS for tax exempt organization. (e.g lobbying/political affiliation etc.)
Click here to download the Article of Incorporation format prescribed by the Maine Secretary of State corporation division. This is the basic minimum required and other provisions that you need to add to this articles (like those mentioned above) are to be attached as an exhibit to this sample.
Click here to download a samle Article of Incorporation for starting a NPO in Maine, which can be used to draft the exhibit section of the Articles of Incorporation.
Executing the Articles Of Incorporation
The Articles of Incorporation should be printed or typewritten on blank sheet of Paper and signed by all the Incorporators on all pages, mentioning their names and capacity in which they are signing the Articles of incorporation under each of their signtaures.
Step 3) Filling up theCertificate of Organization
Filing fee – The present filing fee applicable to starting a NPO in Maine is $40.
This amount can be paid through check or remitted favoring “Maine Secretary of State”
The duly completed Articles of Incorporation must be submitted in person or mailed to :
Secretary of State
Division of Corporations, UCC and Commissions
101 State House Station
Augusta, ME 04333-0101
Telephone Inquiries: (207) 624-7752
You can post any queries in this regard to : CEC.Corporations@Maine.gov
Birth of a Nonprofit organization
The Nonprofit organization comes into a formal legal existence in Maine upon successful filing of the Articles of Incorporation with the Secretary of State, Maine.
Formalities to be completed after starting the NPO
A) Drafting of Organization’s Bylaws
The following important provisions of the Nonprofit Act of Maine are to be kept in mind when drafting the organization’s bylaws –
Director’s quorum – As per the Act, the director’s quorum as specified in the bylaws cannot be less than 1/5th of the number of directors in office.If the bylaws is silent on this subject the majority of directors constitutes the quorum.
Member’s Quorum – As per the Act, the members quorum is taken as specified in the bylaws. If not specified in the bylaw, it is to be taken as 10% of the voting membership represented.
B) Applying for recognition of State corporate tax exemption – A nonprofit organization fomed in Maine is eligible for state tax exemption on corporate Income of franchisee tax. This is done by filing a simple application with the state tax authorities after forming a noprofit organization. ( Contact Beaureu of Taxation, Augusta for getting stae tax exemption – visit: www.state.me.us/revenue)
Time required -The filing of Articles of Incorporation can can be completed in 3-5 days. ( as less as 1 day for expedited filing).
The Incoporation process initself is a good learning for anyone planning to Start a Nonprofit organization as it makes him aware of the laws that will eventually govern the Nonprofit organization’s day to day activities.
This important learning does not happen, if one decides to use the services of professional service providers for Incorporation. Incorporating by one self also considerably reduces the Incorporation cost.
Even if one decides to use the services of an “Commercial registered agent”, one should draft the articles of Incorporation and bylaws on his own as the articles and bylaws eventually govern the day to day affairs of the organization.
It is thus not good to let an external person draft them at the time of starting a nonprofit organization.