Are you looking to start a nonprofit corporation in Alabama, but you’re not entirely familiar with how the formation process works?
Forming a nonprofit organization can have some tricky compliance requirements, and you don’t want to risk making any mistakes during this process. In this guide, we’ll discuss all the relevant details of forming a nonprofit corporation in Alabama.
To get started, please reference our 11-step guide below or hire a professional online incorporation service to get started.
How to Form an Alabama Nonprofit Corporation (in 11 Steps)
1) Name Your Nonprofit
The first step for forming a nonprofit organization in any state is to come up with a strong name for it. Remember that the name of your nonprofit is often your best opportunity to make a good first impression with people, and you should clearly describe your organization’s mission in your name.
Before you become too attached to one name idea, you should run a business entity search by entity name on the Alabama Secretary of State website. This will tell you if someone else is already using your desired name, or if it’s available for your nonprofit to use.
2) Designate an Incorporator and an Initial Board of Directors
The incorporator is the person who is responsible for preparing, signing, and filing your nonprofit’s Articles of Incorporation. This document is the form that officially creates your organization with the state of Alabama.
At this time, you should also choose your initial board of directors.
In Alabama, you are required to have at least three people on your initial board.
3) Designate a Registered Agent
Alabama nonprofit corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation.
Who Can Be My Registered Agent? A registered agent must have a physical address within the state of Alabama where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Alabama Secretary of State says that,
A registered agent is an agent of the entity on which may be served any process, notice, or demand required or permitted by law to be served on the entity.”
We recommend hiring a professional registered agent service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or corporate or personal address off the public record.
4) File Domestic Nonprofit Corporation Certificate of Formation
The official document required to form your nonprofit corporation with the state of Alabama is the Certificate of Formation
This three-page document includes all of the vital information describing the organizational structure of your nonprofit, including the following information:
- Name of your nonprofit corporation
- A copy of your Name Reservation certificate
- Whether your nonprofit has members or no members
- Name and address of the individual filing the form
- Name and address of your registered agent
- Number of directors constituting the initial board
- Names and addresses of initial directors
- Name and address of incorporator
- Signature of incorporator
Once you’ve finished filling out this form, you’ll need to write a check for $100 and mail it along with your Certificate of Formation to the following address:
Alabama Secretary of State
Business Services Division
RSA Plaza – Suite 580
770 Washington Avenue
Montgomery, AL 36104
In Alabama, your formation documents are usually processed in two steps; first the Office of the Judge of Probate processes them (1-2 business days), and then your documents go on to the Secretary of State. The whole process takes approximately 1-2 weeks.
5) Acquire an EIN
According to the IRS, every nonprofit corporation should obtain a federal tax ID number, otherwise known as an employer identification number (EIN).
The EIN enables your nonprofit to hire employees, open business bank accounts, and file for 501(c)(3) tax exempt status. The process to acquire an EIN is quite simple, and includes the preparation and filing of one simple form. Obtaining an EIN is also free.
6) Establish Bylaws and a Conflict of Interest Policy
Think of the bylaws as a governing document for how your nonprofit corporation will be operated. Bylaws outline procedures for things like holding meetings, outlining your membership structure, defining your corporate purpose, describing the responsibilities of your board of directors, and other important details.
A conflict of interest arises when a contributor to your nonprofit has personal interests that compete with those of your corporation.
The conflict of interest policy protects your nonprofit in these situations. It includes a duty to disclose clause that says anyone involved with your nonprofit must disclose any financial interests and material facts to your directors. It also outlines procedures for addressing conflicts of interest if they ever arise.
7) Hold an Initial Meeting and Establish Your Corporate Record
At this point, you’re ready to hold an initial organizational meeting with your board of directors. At this important meeting, you need to elect directors and officers, approve the bylaws and conflict of interest policy, and adopt resolutions.
As with any meeting of your nonprofit corporation, you should take detailed notes of everything that takes place. This documentation can then become part of your corporate record, which is a permanent written record of all important organizational decisions.
8) File for Alabama Tax Exemption
Some organizations, schools, and governmental agencies can apply for tax exemption from the state of Alabama. This exempt status excuses you from paying any sales and use taxes within the state. For more information on this important step, check out the Tax Facts for Tax-Exempt Entities provided by the Alabama Department of Revenue.
9) Register for Charitable Fundraising
The guidelines for this step are quite similar to the previous step. You will need to register with the state of Alabama prior to soliciting any donations for your nonprofit corporation, which means filing a certificate of registration with the office of the Attorney General. You’ll be required to include your annual financial report with this filing, too.
If your organization has multiple chapters or branches, each of them will need to file a separate notice, either with the Attorney General or with the parent organization, which can then compile them and submit them all to the Attorney General.
10) Obtain Business Licenses and Permits
Most business in Alabama are required to obtain a business privilege license. This license is regulated by each county. In addition to the privilege license, there are hundreds of industry-specific permits and licenses that you may need to acquire for your organization.
Take a look at the state’s Quick Reference Guide for licenses to determine if any of them will apply to your nonprofit corporation.
Your city or county may also require licenses specific to your location. Here are some of the largest counties in Alabama which require local licenses:
11) Acquire Insurance
Every business with employees located in the state of Alabama is required by law to obtain two different kinds of insurance policies: unemployment insurance and workers’ compensation insurance.
You can learn more about these insurance types and how they apply to Alabama businesses by visiting the Unemployment Insurance and/or Workers’ Compensation pages on the Department of Labor’s website. No matter what line of business your nonprofit is in, you need these policies.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance, but these are not legally required.
Where Can I Find Help for My Alabama Nonprofit?
The process of forming and maintaining nonprofit corporations can be tricky, no matter which state you’re located. Fortunately, there are great resources in Alabama to help you out in case you get stuck.
As for the state of Alabama, if you require assistance, you can always turn to the Alabama Association of Nonprofits. In their own words, the Alabama Association of Nonprofits exists “to strengthen the capacity of Alabama’s nonprofit sector through professional development, advocacy and management support, all resulting in better communities and a stronger Alabama.” The AAN does require membership, but they offer a wide variety of learning tools and nonprofit advocacy programs that make it worthwhile.
In addition, if you would rather hire a service to incorporate your nonprofit for you, that’s an option as well. There are plenty of services that can handle much of the formation process, leaving you more time to focus on the actual operation of your nonprofit corporation.
These service providers (like Northwest Registered Agent) also offer valuable and convenient bonus features, like the inclusion of a full year of registered agent service with the purchase of a nonprofit formation package. They can save you a considerable amount of hassle, and all without costing an arm and a leg.
As you can see, there are quite a few crucial steps that you’ll need to take if you want to form a compliant nonprofit corporation in the state of Alabama. However, it’s important to remember that if you need help at any time, it is available to you ― you don’t need to DIY the entire process.
We hope this guide helped you understand the details of the Alabama nonprofit corporation process, and we wish you the best of luck with your new charitable organization!