How to form a nonprofit corporation in Oregon

A nonprofit corporation is a business formed with the purpose of furthering a particular social cause or advocating for a specific point of view. Rather than earning a profit, a nonprofit corporation reinvests its revenue to achieve its objective instead of distributing that income to its shareholders.

Nonprofit corporations, at their core, are a variation of a traditional C corporation formed to provide public benefit. While much of the structure and set-up process is similar between the two entities, setting up a nonprofit properly has a few additional caveats to be aware of including applying for federal and state tax exemptions.

Nonprofits are most popularly known for being tax exempt. This means they do not pay income tax on the money they receive on their income. If your business plans to operate only for scientific, research, educational, religious, or charitable reasons, a nonprofit would be your best entity fit.

The Benefits of a Non Profit Corporation

• Protect your Personal Assets
  Starting a nonprofit corporation designates your business as a separate legal entity, preventing you from being personally responsible for any debts accrued by your business.
• Build Credibility
  Establishing a professional identity for your nonprofit demonstrates the charitable intentions of your business to the community, providing additional credibility and trust.
• Tax Advantages
  Non profit corporation owners can apply for tax exemption under certain circumstances, allowing more money to go towards the charitable cause your business was created for.

Compare the main entity types below

Now that you have decided to start a nonprofit, you need to determine the charitable mission and purpose for the business. In order to comply with IRS regulations, it's important that your business is organized for an exempt purpose. Your business may not engage in political activities and must not overcompensate its members.

• The name you choose must be unique and not "confusingly similar" to the name of any other Oregon business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states. In the state of Oregon, your business name must be "distinguishable on record" before you may file for the name. You can find out whether a name is available in Oregon with the help of their Business Name Availability Check function. This determines whether or not someone has the business name you're considering filing in Oregon. Be sure to check variations or alternate spellings as well, otherwise your filing may be rejected.
• Please keep in mind that the state of Oregon does not consider the following aspects when determining if the business name is available for filing.
  1. Words that tell what kind of a business entity it is, including "Inc.," "LLC," "Co.," and "Corp."
  2. Words that don't really change the meaning of the name
  3. Plurals
  4. Punctuation, including periods, commas, and apostrophes
  5. Capitalizations

You can learn more about how to choose and register a business name and other important statutory information through the Oregon Secretary of State.

Most states require that you designate a registered agent for your business, and Oregon is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

In the state of Oregon, most entities on record with the Secretary of State must maintain a registered agent and address in Oregon. A P.O. Box is not accepted as a registered agent address. A member of the LLC can act as the registered agent if desired, or you may also use a third-party registered agent service like MyCorporation.

Why designate a third party to act as my registered agent?

It should be noted that registered agent information is made publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent. In the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service Opens in a new window such as MyCorporation to act as a registered agent on behalf of their business.

The state of Oregon requires you to file Articles of Incorporation (PDF)(680 KB) Opens in a new window to form a nonprofit corporation. Please keep in mind that the filing fees differ whether you're filing as a for-profit corporation or nonprofit corporation.

What information should be included in the Articles of Incorporation?

This document includes basic information about the Oregon nonprofit corporation such as:

• Name of the nonprofit corporation
• Principal office address of the nonprofit including street and mailing address
• Registered agent name and mailing address
• Initial president and secretary names and addresses
• Type of corporation (public benefit, mutual benefit, or religious)
• Delayed effective date of the nonprofit corporation (leave blank if there isn't a date)
• True name and mailing address of the individual causing the document to be delivered for filing

A filing fee of $50 is also required when submitting nonprofit Articles of Incorporation. Make the check or money order payable to "Corporation Division."

Bylaws are the detailed set of rules agreed upon and adopted by the board of directors of the nonprofit. Think of these as an instruction manual to run the business. They include rules and procedures related to meetings you will hold, and notes on the ways you will elect officers and directors of the business. While bylaws are not required for nonprofit corporations in the state of Oregon, it is recommended that nonprofit corporations still maintain and keep a record handy.

If you are not sure how to create corporate bylaws, you can purchase MyCorporation's customized Minutes and Bylaws package. Inside our package you will find internal documents required to fulfill your corporate formalities and properly operate your business after it has been incorporated.

The first board meeting for your business is often referred to as the organizational meeting of the board. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers.

This meeting and all future meetings of the board of directors must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are kept with the corporate records.

Corporate minutes are required for all Oregon nonprofit corporations by law. Falling behind on this critical task can cause your business to fall out of good standing, and even jeopardize its tax-exempt status. It is important to maintain a corporate minute book. Inside you may keep originals or copies of all the signed and approved minutes or Actions by Unanimous Consent from any special or annual meetings of the corporation's shareholders and directors.

An EIN (also referred to as a Federal Tax ID) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is less sensitive. Like an SSN, an EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, and build credit for your business
• Apply for applicable business licenses when required
• File for tax exempt status

You will only need a few pieces of information to file, including your mailing address and legal business name. You can apply online Opens in a new window with the IRS by downloading IRS IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.

Your nonprofit corporation is not automatically tax exempt. In order to become tax exempt, you will need to take certain steps to obtain this status. First, you will need to file for exempt status with the Internal Revenue Service using either Form 1023 (PDF)(866 KB) Opens in a new window or Form 1024 (PDF)(360 KB), depending on the classification of your organization.

In some cases, you may be eligible to file Form 1023-EZ Opens in a new window, a streamlined version of the application for recognition of tax exemption. You can avoid a $25 fee if you file for federal tax exemption before filing with the state.

Once your filing with the IRS is complete, they will send you a Determination Letter that officially recognizes your nonprofit's tax exempt status. To gain the same exemptions at the state level, fill out Form CT-247 (PDF)(191 KB): Application for Exemption from Corporation Franchise Taxes by a Not-for-Profit Organization with the New York State Department of Taxation and Finance. There is no fee for this form.

You can learn more about the process directly from Publication 557 from the IRS (PDF)(2.1 MB).

All businesses are required to file for a general business license (sometimes referred to as a business tax certificate) in the state of Oregon. If you plan on operating your nonprofit in multiple cities, you will need to apply for a business license in each location. Additional permits may be required along with a general business license and are to be filed with the county or state.

You can find out about the specific licenses applicable to your business by checking with the city offices where you will conduct business, or by using MyCorporation's business license compliance package. Our team of skilled professionals will identify the licenses required by your nonprofit and provide you with all the information you need to file.