Starting a Nonprofit in Maryland
Starting a Nonprofit organization in Maryland is governed by the Non-stock corporation Act of the Maryland statutes.
Eligibility for starting a Nonprofit organization in Maryland
1) The application for starting must be moved by one or more incorporator who is 18 years or older. The Incorporator may or may not be a resident of Maryland.
2) The NPO must have a valid street address as its registered address in Maryland. This may or may not be the same as its principal place of Business.
3) The NPO must be represented by a ‘registered agent’ (see Incorporation terminologies) who has a valid street address of Maryland. The registered agent so appointed assumes the responsibility of receiving notices or demands on behalf of the Non profit organization.
Steps Involved in Starting a Nonprofit organization in Maryland
Step 1) Choosing a Name – As per Maryland statutes, the following factors msut be kept in mind when choosing a name:
a) the name of the NPO must contain any one of the following corporate designators – “Incorporated”, “Corporation”, “Limited”, “Inc.”, “Corp.”, or “Ltd.”
b)The name must be distinguishable from the name of other business entities operating out of Maryland. A non-binding Name availability search can be conducted online or by calling up the SOS office at 767-1330.
There are several other factors that must be kept in mind when Naming a Nonprofit organization. (Recommended read: Naming a Nonprofit organization).
Step 2) Preparing the Articles of Incorporation
As per theAct, the Articles of Incorporation of a Non profit organization in Maryland must include the following mandatory clauses –
1) The Name of The organization that meets the requirements mentioned above.
2) The purpose or Purposes for which the organization is being established.If the Organization proposes to seek Recognition for federal tax exemption, it must be organized exclusively for charitable, religious, educational, scientific or any purpose allowed for exemption organizations under Section 501(c)(3) of the Internal Revenue Code, or any other section under which the tax exemption would be sought.
3) The Street address of the Principal office of the NPO of Maryland.
4) The Name and valid street address(not the P.O Box no.) of ‘Resident Agent’
5)A specific statement that reads as follows -” The corporation has no authority to issue capital stock.”
6) The Names and Address of the Initial board members. (The Act allows a minimum of 1 board director. )
Clauses required to be Inserted if the organization wishes to seek IRS tax exemption –
If the Organization wishes to seek tax exemption under section 501(c)(3), it is advisable to insert the following clause exactly into the Articles of Incorporation –
“No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof.
No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.
Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible
under Section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall
determine, which are organized and operated exclusively for such purposes.”
Sample Articles of Incorporation –
Sample Article of Incorporation as prescribed by the SOS for NPO not proposing to seek tax exemption can be downloaded here.
Sample Article of Incorporation as prescribed by the SOS for NPO proposing to seek tax exemption can be downloaded here.
Executing the Articles of Incorporation
The Articles must be be printed in duplicate on white sheet and signed across by all the Initial board members or the Incorporators in original on all pages.
The Resident agent must also sign the undertaking column, accepting his appointment as the resident agent of the Nonprofit organization.
Filing Fee payable
The current fee applicable to filing Articles of Incorporation in $170.00
($100 towards filing + $20.00 organization and capitalization
fee + $50.00 assessment for the Maryland Not-For-Profit Development Center Program Fund thus totaling to $170.00.)
One may also apply for expedited filing by paying an additional service fee of $50.00.
The Filing fee is payable vide check or credit card (Master card or Visa)
Step 3) Filing the Articles of Incorporation
The completed form along with a check for the requisite fee should be mailed across to :
State Department of Assessments and Taxation, Charter Division, 301 W.
Preston Street; 8th Floor, Baltimore, MD 21201-2395.
The form can also be Faxed along with credit card payment information to 410-333-7097, but in this case the fee for expedited filing is payable.
Time required – It takes around 7-8 weeks to complete the regular filing exercise for forming a nonprofit organization.
Expedited processing are generally completed within 7 business days.
If the Articles of incorporation are hand-delivered, there is also a provision for same day filing for limited number of applications daily. Expedited service fee is also payable for availing same day service.
Birth of Organization – The Nonprofit organization comes into a formal legal existence in Maryland when the Articles of Incorporation are successfully filed with the State department, Maryland.
Post Incorporation formalities
1) Drafting of Organization’s Bylaws – The bylaw must be adopted in the very first meeting of the newly formed nonprofit organization.
2) Obtain Federal Identification Number (also called the Employer Identification number or the EIN) from the IRS.
3) Hold Organizational Meeting – to adopt the bylaws (mandatory), appoint committees and any other issue that the board of directors may wish to undertake.
4) Complete and File Form 1023 if the Organization is planning to seek 501(c)(3) status
5) File Charitable Solicitation Form (COR-92) Maryland with the
Charitable Organizations Division, if the annual funds raised increase beyond $25000 in that year
Conclusion- Filing for Incorporation does strictly speaking does not require availing the services of a lawyer. In fact the very process of applying is a great learning experience for anyone planning to run a Nonprofit organization as it helps one understand the very basic premises on which a Nonprofit organization operates.
If however you decide to outsource this , there are several same-day incorporation service providers who will do that for you in return for a fee. (You can search for them on the net).
Even if you decide to use the services of the professional ‘commercial registered agents’, you should ideally draft your own articles and bylaws because these two documents will eventually govern how your nonprofit functions on a day to day basis.