When hearing the word “nonprofit,” what are some of the first thoughts that come to mind? Whether you think of volunteers donating their time and efforts to a singular cause, or a line at a soup kitchen, you’ve barely scratched the full extent of nonprofit activity that occurs daily throughout Illinois. According to the National Center for Charitable Statistics, a clearing house of data on the U.S. nonprofit sector, there were around 15,076 nonprofit organizations in Illinois in 2013 (this number represents the nonprofits that file annually). This number equals 11.79 nonprofit organizations for every 10,000 Illinois residents.
At James C. Provenza & Associates, P.C., our Chicago IL nonprofit attorneys have helped numerous nonprofit organizations with a variety of legal issues, whether setting up the nonprofit’s articles of incorporation or helping the nonprofit obtain its tax-exempt status. We boast an esteemed reputation with many nonprofits, and we have a wide network of resources and in-depth knowledge of Illinois nonprofit law. As such, if you’re wondering whether your organization qualifies for a nonprofit status in Illinois, look no further than attorney Provenza. To speak with our Illinois law firm for a free, no-obligation consultation, call us today at (847) 729-3939.
Types of Nonprofits
At its core, a nonprofit organization seeks to accomplish important social goals rather than operating solely to make a profit. Moreover, a nonprofit must express a charitable mission, and this mission can cover everything from helping the homeless to providing educational services. According to IRS Publication 557, some of the qualified nonprofit organizations include:
- 501(c)(1) — Corporations organized under Act of Congress, such as Federal Credit Unions
- 501(c)(2) — Title Holding Corporation For Exempt Organization
- 501(c)(3) — Organizations with the following purposes: religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international sports competitions, prevention of the cruelty of animals, and more
- 501(c)(4) — Civic leagues, social welfare organizations, and local associations of employees
- 501(c)(5) — Labor, agricultural, and horticultural organizations
- 501(c)(6) — Business leagues, chambers of commerce, real estate boards, etc
- 501(c)(7) — Social and recreational clubs
- 501(c)(8) — Fraternal beneficiary societies
- 501(c)(9) — Voluntary employees beneficiary associations
- And many others…
Forming a Nonprofit Organization in Illinois
If you’re thinking of making your organization a nonprofit in Illinois, one of the first things to do is to confirm that a nonprofit is necessary in your area. Research if an organization already exists that serves your cause, and if so, consider working together instead of creating a competitor that would dilute the effect of fundraising dollars and volunteering hours. Also, if there is another organization, consider a fiscal sponsorship, which is where a 501(c) nonprofit organization incubates your charitable nonprofit.
After researching the local nonprofit activity, the next steps in setting up a nonprofit include:
- Choosing the initial board of directors. Illinois nonprofit corporations must have three or more directors, and at least one incorporator, who can be any individual over 18 years of age or a corporation.
- Choosing a name for your nonprofit corporation. Check with Illinois’s corporate name database or contact the Illinois Secretary of State office (in Springfield) to see if a potential name is available.
- Preparing and filing your nonprofit’s articles of incorporation. You’ll need to file the articles of incorporation with the Illinois Secretary of State office. The articles should include the corporation’s purpose, the address of the corporation’s registered office, the name and address of each incorporator, and the name and address of each initial director.
- Preparing the nonprofit’s bylaws. The bylaws need to comply with Illinois while including the rules and procedures that the corporation will follow.
- Holding the first official meetings of your board of directors. Some actions during this meeting should include approving the bylaws, appointing officers, setting up an accounting period and tax year, approving initial transactions of the nonprofit, and creating the minutes of your meetings.
Obtaining State and Federal Tax Exemptions for Charity Purposes
After forming the nonprofit in Illinois, the next step is truly fundamental to your nonprofit’s future operations. In essence, the Illinois state and the federal government seek to encourage charitable activity by providing tax exemptions. These exemptions can be the backbone of a functioning nonprofit, and so you should start preparing to obtain state and federal tax exemptions for your charitable purposes. Following are a few steps that you can take to obtain your tax-exempt status:
- File Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, for tax exemptions at the federal level.
- For Illinois tax exemptions, check with the Illinois Department of Revenue for the proper documentation and forms needed.
- Make sure to follow reporting and registration requirements, which means filing annual returns with the IRS.
Contact James C. Provenza & Associates Today
There are many different types of nonprofits out there. If you are thinking of making your organization into a nonprofit in Illinois, your best bet is to consider a 501(c)(3) nonprofit, as this is one of the most common types of nonprofits in the state. However, you may be able to find a common cause among the other types of nonprofits. One of the first steps in starting your nonprofit is to call Chicago IL nonprofit attorney James C. Provenza today! For a free, no-obligation consultation, call us today at (847) 729-3939.