How to Form a Nonprofit in Delaware

Choose a name for your nonprofit

Choosing a name for your nonprofit is one of the first and most essential steps in the incorporation process. This name will be the first thing the public sees, so it should reflect your organization’s mission. All names are also required to be unique from other currently incorporated businesses.

Nonprofits in Delaware can reserve their name for up to 120 days. This reservation costs $75 but protects the name from being taken during incorporation.

Appoint a board of directors

Nonprofits in Delaware are required to have a board of directors who will be responsible for overseeing the organization. This board must have at least three directors that aren’t related to each other. A more diverse board gives the nonprofit more varied perspectives and skills for better decision-making.

Filing the Certificate of Incorporation

Delaware requires that all corporations file a Certificate of Incorporation to complete the incorporation process. This document tells the government about your organization’s mission, name, and address.

Nonprofit organizations have a specific version of this form to fill out: the Certificate of Incorporation for Exempt Corporations. This form version exempts them from paying franchise taxes and comes with a cheaper $25 annual report fee. As of 2024, filing this document costs $109.

Create and adopt bylaws for your nonprofit

Corporate bylaws outline the way that business owners make decisions for the nonprofit. Delaware does not legally require these laws; however, forming them is still recommended to help the company operate smoothly.

Hold your first board meeting

After you create your bylaws, you must meet with the board of directors to review them. Before adopting the bylaws, they must receive approval from the board. The directors will also vote on the nonprofit’s officers during this meeting. This gathering will play an essential role in shaping how the nonprofit operates.

Receive your Employer Identification Number (EIN)

All nonprofit owners must apply for an Employer Identification Number from the IRS. This number is required to open business bank accounts and apply for tax-exempt status for business operations and savings.

Apply for federal tax-exempt status

To be considered tax-exempt, a nonprofit needs to file Form 1023-EZ or Form 1023 with the IRS. Form 1023-EZ is designed for smaller nonprofit organizations and is less expensive to file. The Eligibility Worksheet at the end of Form 1023-EZ can help determine if your company fits the qualifications.

As of 2024, the application fee for Form 1023 is $600, and 1023-EZ is $275. Once your nonprofit is approved, it will gain the tax-exempt status.

Register for business licenses

Nonprofits in Delaware may need to register for specific licenses depending on their fundraising activities. For example, a nonprofit that holds raffles may need to acquire a raffle permit if the ticket price is above a specific price. Check with Delaware’s Division of Professional Regulation for more information on necessary licenses.

• Credibility: The government officially recognizes incorporated nonprofits, making them more trustworthy. These nonprofits have more access to support since donors are more likely to donate to a credible nonprofit.
• Tax-exempt status: Tax-exempt nonprofits are not required to pay federal income taxes. This status also benefits donors by making their donations tax deductible.

• Limited liability protection: Like other incorporated businesses, nonprofits provide limited liability protection to their owners. The owners’ possessions are protected from seizure if the company encounters legal problems.
• More access to grants and funding: Nonprofits often gain more grant and funding opportunities. As mentioned, it is also easier for incorporated nonprofits to obtain more investors due to their increased credibility.