There are two stages to consider when creating a nonprofit organization in Minnesota: first, drafting and filing the legal documents required to create a nonprofit organization, and second, applying to the IRS for 501(c)(3) status, if desired.
To create a Minnesota nonprofit organization, you need to file Articles of Incorporation with the Minnesota Secretary of State. Please note that if you intend to seek 501(c)(3) status with the IRS, there is specific language that you need to use in your Articles of Incorporation to comply with IRS requirements, and that language is not included in the standard form provided by the Minnesota Secretary of State. The exact required language will depend on the type of organization and its mission.
A nonprofit organization is also required to have Bylaws. Our laws are essentially the rules inside the organization and often cover issues like the election of directors, who can be a member of the organization, how officers are selected, the role of the president of the nonprofit, and other principles under which the Minnesota nonprofit will operate.
In general, nonprofit organizations soliciting contributions must file an “Initial Registration / Annual Report Form” and an annual report with the Office of Minnesota Attorney General. You can find these forms here: Minnesota Nonprofit and Charity Forms. This is required by Minnesota Statutes section 309.53. However, there are exceptions for small organizations that meet the exemptions (exclusions) noted in Minnesota Statutes section 309.515.
Once you have formed a Minnesota nonprofit organization, the next step is to determine whether you want to apply for 501(c)(3) status. Obtaining 501(c)(3) status provides a number of benefits including being able to receive donations from other 501(c)(3) organizations and individual donors being able to receive a charitable tax deduction for their donation to your organization.
The application for seeking 501(c)(3) status is IRS form 1023. Most people who look at IRS form 1023 are overwhelmed by the daunting amount of information required. Our law firm has received many calls from people who attended who apply for 501(c)(3) status on their own and later sought the help of a Minnesota nonprofit attorney because they couldn’t figure out the application or the IRS rejected their application due to problems in the application. If you want to apply for 501(c)(3) status on your own, the IRS provides some guidance: 501(c)(3) application process.
Very small nonprofit organizations may want to consider whether it is worth obtaining 501(c)(3) status in light of the work and attorney’s fees associated with the process. For small nonprofit organizations, the cost to form a nonprofit organization and get legal guidance in completing the form to seek 501(c)(3) status is often $1,500 to 3,000, depending on the complexity of the organization and the time the organization’s staff are willing to spend (versus delegating the work to the attorney).
The federal application fee (filing fee for IRS Form 1023) is generally under $1,000.
Attorneys’ fees can vary depending on the firm you select and the complexity of your nonprofit organization. For example, a small poverty organization would be on the low end, and a hospital would be on the high end.
My firm offers a low fixed fee to form a standard (minimal customizations) Minnesota nonprofit organization in compliance with federal tax law while remaining available to assist with preparing IRS Form 1023 at the usual hourly rates (depending on the complexity of the matter). Usually clients…
On average, it takes approximately 3-6 hours finalizing Form 1023 after a client has made best efforts preparing it.
If you are considering starting a Minnesota nonprofit organization, the first step is to talk to people who are interested in the cause. A Minnesota nonprofit organization needs at least three people to serve on the Board of Directors. The law permits you to serve on the Board of Directors and the president and director of the organization at the same time, so you will need at least two others to serve on the Board of Directors.
Although many people who were on nonprofit organizations consider it their organization, from a legal perspective, the organization is owned by the public and merely in trust to you under your control. This means you must keep your personal finances separate from the organization’s finances, you will never receive profit from the organization except a fair market value compensation for your services as a wage, and when the nonprofit ends, everything it owns (its assets) must be donated to other nonprofit organizations in accordance with the law.