Establishing a nonprofit is kind of similar to forming a corporation in Colorado. You can easily start a nonprofit in Colorado as a limited liability company, a corporation, or any other type of business structure. Unlike for-profit businesses, nonprofits focus on addressing pressing social issues than profit-oriented businesses.
This article will guide you through the Dos and Don’ts of starting a nonprofit in Colorado. LLCBuddy editors explain all the steps you must follow to form a corporation for your nonprofit organization. It must be noted that this page shared generalized steps to form a nonprofit in Colorado. It is recommended to consult an attorney or hire a professional service.
What is a Nonprofit in Colorado
Nonprofit organizations are legal entities that operate to serve public benefits and address community issues. Unlike for-profit organizations, nonprofits do not aim to generate any profit. The Internal Revenue Service (IRS) generally exempts nonprofit organizations from tax. However, based on the business entity structure, you will receive tax exemptions as a nonprofit.
In Colorado, ensure you have a community issue to address before forming your nonprofit. It can generally be education, religion, charity, social service, or other social issues. Nonprofits do not pay taxes on the money they receive through fundraising programs, donations, or any charitable funding.
Types of Nonprofits in Colorado
The first thing one has to decide is what type of nonprofit structure one wants. There are several types of nonprofits one can start. Here is a list of nonprofit types one can choose from-
- Nonprofit LLC
- Nonprofit Corporation
- Unincorporated Nonprofit
BOI Report Filing
According to the Corporate Transparency Act, every LLC, corporation, and other type of business that is registered with the Colorado SOS or similar authority, must file the BOI report with FinCEN. From January 1, 2024, it is mandatory to file a BOI report for every business entity. In this report, LLCs have to share information about the beneficial owners (having equal or more than 25% share). LLC owners can file BOI reports online or offline.
Businesses in Colorado that are created before January 1, 2024, should file their BOI report by January 1, 2025. Businesses that are created in 2024, must file the BOI report within 90 business days of finishing the formation process. Missing out on filing the BOI report may lead to a monetary penalty of $500/day.
How to Start a Nonprofit in Colorado
Nonprofits are certainly different from for-profit organizations. The main focus of the organization is on social values rather than profit. The process of having a nonprofit in Colorado is similar to forming any corporation in Colorado. However, there are a few additional steps to follow.
Step 1: Develop Your Mission and Vision
Before you get into legal details, you need to define the purpose and goal of your organization clearly; this will go a long way in guiding your decisions as well as making it easy for you to explain your mission statement.
- Pick out what specific cause or issue you want to address;
- Define who you will target or help reach particular goals;
- List down both what people should do within a short period and what they should achieve in the long term perspective;
- Write a captivating mission statement.
Step 2: Name Your Nonprofit in Colorado
Naming a business in Colorado has a handful of regulations. If you start a corporation or an LLC in Colorado, you must follow those regulations to name your nonprofit. The most important rule is to check if the name is available in Colorado to use.
If you’re forming an LLC in Colorado for your nonprofit organization, check out LLC naming guidelines in Colorado. For the corporation regulations, read on how to start a corporation in Colorado. As soon as the name is decided, you can reserve it with the Colorado Secretary of State. You can also file DBA in Colorado before you establish your nonprofit organization. DBA can be filed in one method, online filing. The DBA filing fee in Colorado is $20.
- Online DBA Filing: For online filing, check the Colorado Secretary of State. There, look for the “Trade Names” section. You will get the registration form.
- Offline DBA Filing: There is no offline filing available in Colorado
- DBA Renew Time in Colorado: one year
Step 3: Appoint Initial Board Members
If you’re forming a corporation for your Colorado nonprofit, it is required to appoint the initial board members. In Colorado, you need at least One unrelated directors to start the organization. If you don’t choose a minimum of One directors, it will automatically become a member-managed corporation.
Step 4: Get Colorado Registered Agent
This is a very important step for any business in Colorado. The Registered Agent in Colorado is a person who conducts all types of documentation between the State and your nonprofit organization. The Registered Agent must be from Colorado, above 18 years of age, and must have legal rights to conduct business in the state. Several professional and business formation services offer registered agent services in all the states in the USA. It is better to hire a professional rather than being your own Registered Agent in Colorado.
Step 5: File Articles of Incorporation with Colorado SOS
This is the most important step in forming a nonprofit corporation in Colorado. File your Articles of Incorporation with the Colorado Secretary of State. You can file your nonprofit corporation through one method that is filing online. Submit the details of your nonprofit corporation, like the name of the nonprofit, address, name and address of the registered agent, operation dates, directors’ details, and more information related to your company.
- Online Incorporation: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
- Offline Incorporation: There’s no offline method of filing the documents
- Incorporation Fee in Colorado: $50 for filing online
Hiring a professional service might be a wise idea here. Having a corporation is much more complex than forming an LLC. We recommend ZenBusiness as they are one of the top business service providers currently. They offer LLC formation at $0 in Colorado.
Step 5.1: Write Company Bylaws
As soon as you file the formation documents, it is time for the company bylaws. The directors and board members must decide how the meetings, elections, voting, and other corporate activities will be held. These bylaws must comply with the Colorado state law. It is similar to an LLC operating agreement in Colorado for the LLC owners.
Step 6: Get an EIN in Colorado
The next step is to obtain the EIN in Colorado. The employer identification number (EIN) is required to conduct business in Colorado. You will need to acquire the Colorado EIN from the official IRS website. To obtain the EIN, submit your application to the IRS office either by mail or through their online platform. There is no associated cost for this process.
Step 7: Tax Exemptions for Your Nonprofit
When you start a nonprofit in Colorado, you enjoy tax exemptions. As the nonprofits are not profit-oriented, they get a huge tax exemption from Federal and State authorities.
Federal Tax Exemption
You must submit Form 1023 to the IRS to file for federal tax exemption. This form, titled “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” is required for all nonprofit corporations. Smaller nonprofits have the option to file Form 1023-EZ instead. You will be prompted to provide details about your organization upon obtaining the relevant form. Complete the form with the necessary information and submit it. The filing fees are $600 for Form 1023 and $275 for Form 1023-EZ.
State Tax Exemption
Once you get the Federal Tax Exempt, it is time for State Tax Exempt. In Colorado, you must apply for the tax exemption to the Colorado Department of Revenue. Get the form, fill it up with the correct details, and send it to the office. You may need to pay a fee along with the form and supportive documents to apply for the State Tax Exemption. You need an Exemption Certificate to apply for the state tax exemption. Read Colorado classification of taxes to learn more about the Colorado tax structure.
Can I form an LLC for my Nonprofit in Colorado?
Yes, you can form an LLC in Colorado to run a nonprofit. Establishing an LLC nonprofit in Colorado requires similar documents and paperwork. Except for tax exemption applications that one must file with the state tax and revenue department. LLCs must file Form 1023 with the Colorado Department of Revenue to get the tax exemption.
After You Form a Nonprofit Corporation in Colorado
Once your nonprofit is formed, there are additional steps to complete:
- Get necessary licenses: As soon as your corporation or an LLC for your Nonprofit in Colorado will be established, get necessary licenses and permits. Check with the local authority/government to get the local permits.
- Get Insurance for the Colorado Nonprofit: You must get workers’ compensation and unemployment insurance if you have employees. Based on your nonprofit structure, you might need general liability insurance, property, vehicle, auto insurance, etc.
- Get a Business Bank Account: You must get a business account for all types of business-related transactions in Colorado. You may need different documents based on the bank and place of business. Check with the bank for it.
- File Nonprofit as Charity: This is optional. Your nonprofit is either for charity purposes or any purpose that meets your community’s needs. If your organization is for charity purposes, then you can file your nonprofit as a charity to enjoy tax exemptions.
- Other Business Compliances: You may need additional compliances based on your nonprofit type. Check with your attorney or local authority for more information.
- Evaluating And Improving Performance: To evaluate the performance of your non-profit organization, it is necessary to; establish performance metrics also tied to the mission; and implement continuous improvement strategies.
- Staying Current With Nonprofit Trends And Best Practices: To stay up-to-date on trends and best practices in the non-profit world you should join nonprofit associations plus networks.
Common Challenges And How To Address Them
- Funding Sustainability
For funding sustainability issues you need to focus on diversifying funding sources and developing strong relationships with donors. Also, implementing efficient financial management, exploring earned income opportunities for sustainability, and such should be on focus.
- Volunteer Management
The challenges faced in volunteer management can be resolved by creating clear roles plus expectations for volunteers, and providing adequate training also support. Recognize and appreciate volunteer contributions while implementing volunteer retention strategies such as offering regular appreciation events or awards. Provide trainers’ placement services too.
- Mission Drift
This problem can be solved by several mechanisms such as regular review and reaffirmation of your organizational mission–this will ensure that all activities are aligned with the core purpose. Educate board members and staff about the importance of the mission and make them understand how this works out in practice. Implement a strategic planning process and explain to the board why it is important for their organizations to have a well-defined mission.
- Regulatory Compliance
To remain compliant with the law, you need to: keep track of changing laws and regulations all the time; conduct regular compliance audits; seek professional advice when in doubt; and implement comprehensive record-keeping systems.
Names of Nonprofit Corporations in Colorado
Following are some of the Nonprofit Organizations in Colorado. The contact information of these organizations can be found on Colorado Secretary of State portal.
- 350 Colorado. Boulder CO.
- 365 Health. Denver CO.
- 5th Element Center for Dance. Aurora CO.
- 7-20 Memorial Foundation. Aurora CO.
- 9 to 5 Colorado. Denver CO.
- A Child’s Song. Northglenn CO.
- A Kid’s Place DBA LifeStories Child & Family Advocacy. Greeley CO.
- A Little Help. Denver CO.
FAQs
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In Conclusion
Starting a Nonprofit corporation in the Colorado takes careful thought, dedication, and detailing. Follow the steps detailed in this guide while addressing common challenges so that your organization can be built on solid ground and make a long-lasting impact on your cause. Remember also that running a nonprofit organization in Colorado is a perpetual learning, adapting, and growing process.
As you continue your journey, you may need professional help. Having a professional or experienced person, or attorneys while you run your nonprofit in Colorado can make the journey much simpler in the long run. Since forming a nonprofit involves tax exemptions, the government takes additional care to verify your background.
Donations, charity, and several community services are the most desirable ways to evade tax. Hence, many people get involved in nonprofit organizations. It is recommended to consult a legal professional, accountants, and service providers like ZenBusiness for the paperwork and formation process. With persistence, passion, and proper management structure everything is possible hence changing positively your community as far as Non-Profit corporations are concerned.