Alabama Small Business Development Center Network
Alabama SBDC Network

How do I start a nonprofit in Alabama?

Small Business Development Centers are funded and designed to assist for-profit small businesses and are not able to invest a significant amount of time working with non-profit organizations. However, our business advisors are able to provide some guidance, and we have provided some basic information below.  SBDC personnel are able to help non-profits  access disaster relief programs. You may find the Internet links below helpful in finding information on fundraising, management, starting a non-profit business, and other topics of interest to non-profit information seekers. We are not able to help you pursue grants to start your non-profit.

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Nonprofit Organizations

  • A nonprofit organization is clearly defined by a specific mission that is considered a benefit to the community. For example, housing the homeless or operating a museum.

  • No one owns a nonprofit organization in the way shareholders own a for-profit corporation. It must be a non-stock corporation. A nonprofit organization is not controlled by only one or two persons; it is controlled by a board of directors.

  • No part of the income may be distributed to members, directors, or officers. An Executive Director is paid to manage day-to-day operations, but can be terminated by the board.

  • The nonprofit status is a designation awarded by the state. Tax exempt status is awarded by applying to the IRS.  With few exceptions, charitable and nonprofit organizations have no special exemption from the state’s sales and use taxes.

  • Public libraries and the Internet are the best sources of information about potential funders.

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Nonprofit Organizations

Starting a Nonprofit Organization in Alabama

The steps below should help to guide you through the process of starting your nonprofit, but are not a substitute for legal advice from an attorney familiar with the law of tax-exempt organizations in Alabama. The guidelines below are for informational purposes, and we do recommend that you consult with legal counsel to ensure that you are in compliance with all federal, state, and local regulations governing the establishment and operations of a nonprofit, tax-exempt organization.  Source:  Alabama Association of NonProfits

Step 1: Research
Step 2: Key Questions to Ask Before Getting Started
Step 3: State Forms
Step 4: Federal Filings
Step 5: Final Steps

To form a 501(c)(3) nonprofit organization, you will need to complete the following steps

Step 1

Call the Internal Revenue Service (IRS) at 1-800-TAX-FORMS and request the following:

Form 8718 – User Fee for Exempt Organization/Determination Letter Request

Package 1023 – Application for Recognition of Exemptions with Instructions

Form SS-4 – Application for Employer Identification Number (EIN)

Publication 557 – Tax-Exempt Status for Your Organization

These items may also be downloaded from www.irs.gov. Upon completion, submit forms to your local IRS office in Alabama. The IRS charges a processing fee ranging from $150 to $465 for tax-exempt status applications. (You may want to file SS-4 as soon as you’re incorporated if there will be a delay before you file for tax exemption.)

Step 2

Call the Alabama Secretary of State’s Office at 1-334-242-7200 or visit their web-site at http://www.sos.alabama.gov/BusinessServices/DomesticCorps.aspx to request information about nonprofit incorporation. Incorporation is necessary to receive tax-exempt status.

You are required to obtain a Certificate of Name Reservation prior to filling your formation documents. (Name Reservation for Domestic Entities) Your corporate name is not required to include the word “Corporation” or “Incorporated” or an abbreviation of one of these words.  File the original and two copies of the Domestic Nonprofit Corporation Certificate of Formation and the Certificate of Name Reservation in the county where the corporation’s registered office is located.

The Probate Judge will collect the Secretary of State filing fee. Some Probate Judge’s Offices do not accept expedited process fees or credit cards – please be sure to check with the Office of the Judge of Probate prior to filing to determine payment methods and ability to expedite processing.  Filing Fees: Secretary of State: $100.00, Minimum Probate Judge fee: $50.00.

Step 3

Establish a board of directors. Decide on the statement of purpose of the organization. Draft and adopt articles of incorporation and bylaws for the corporation. The articles of incorporation establish the name and purpose of the nonprofit organization. Bylaws are the organization’s primary governing documents. They establish the rules by which the nonprofit will conduct business.

The articles are to include:

    • The name of the corporation
    • A statement to define if the corporation is for public benefit, mutual benefit or religious purpose
    • The address of the main office, and the name of the registered agent at that address
    • The name and address of each incorporator
    • Whether the corporation will have members
    • Provisions not inconsistent with law regarding the distribution of assets and dissolution

The bylaws are to include:

    • The name of the organization
    • The mission of the organization
    • The geographic area served by the organization
    • Membership (Responsibilities, Dues, Quorum, Voting Procedure)
    • Board of directors (Duties, Officers, Meetings)
    • Committees
    • Rules of order
    • Fiscal year of operation
    • Procedures for amending the bylaws

Step 4

Establish some long-range goals for the organization and do some detailed planning for the fist year of operation. This step isn’t required by law, but you are going to have to tell the IRS what you plan to do and what your budgets are going to look like for three years.

Step 5

Prepare to wait, and to answer questions from the IRS. Expect the process to take at least ten weeks.

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