Your nonprofit is taking off. Finally, your outreach strategies have proven successful, your network is growing, and you’re ready to begin charitable solicitations across multiple states. This time is certainly exciting for your nonprofit, but now you’ve encountered a roadblock: registering your nonprofit in a different state.
Did you know that over 40 states require that nonprofits register in order to solicit donations? That means that if your nonprofit is expanding across the country, you’ll need to register with every state where participating or prospective donors reside. Each state has its own regulations and requirements, so figuring out how to get registered everywhere you need to can get complicated quickly.
The ins and outs of registering your nonprofit might seem overwhelming, especially if you’re working with a smaller team that has just started to expand. But meeting your fundraising legal requirements is more than just filling out a stack of paperwork — it’s a crucial step for the continuance of your nonprofit.
If you’re feeling stressed out about ensuring your nonprofit’s compliance, don’t worry! We’ve put together our top 4 tips for navigating the multi-state solicitation registration process:
- Review the essentials
- Understand all your requirements
- Stay organized
- Don’t forget online and event fundraising
It’s essential that you get the registration process right to continue your nonprofit’s operations. Let’s dive in.
1. Review the essentials
Before you get into the nitty-gritty of the registration process, make sure that you and your team have a good grasp of the basics.
Registering your nonprofit happens on two levels: the federal and the state. At the federal level, you register as a 501(c)(3) organization. Then, you file Form 990 with the IRS each year, which conveys your general revenue information to the government. It’s essential that you file your tax returns to avoid fees or losing your tax exempt status.
Aside from ongoing federal-level compliance through annual Form 990 submissions, you’ll need to focus on the state or states where your donors live. This is where things can get a bit more complicated. You’ll need to register your nonprofit with each state where you’ll be soliciting donations from residents. This is called charitable solicitation registration.
Navigating these various state-level filing regulations can be challenging and, if you’re working across several states, time-consuming. But as long as you understand all of the requirements, you’ll be registered in no time.
2. Understand all your requirements
When you’ve gotten a handle on why and where you’ll need to register your nonprofit, you’ll want to dig into the specific requirements you’ll need to meet. Remember that each state has its own requirements. That means if you’re working in multiple states, you need to register in each one.
Meeting these regulations is not only important for legal reasons, but also to maintain your donor base. If your supporters see that you are not complying with these regulations, they might think your organization is ethically problematic, which may damage your donor retention efforts.
Based on the state you’re working in, the kinds of forms that you’ll have to fill out will vary. Depending on the specific requirements of each jurisdiction, you will potentially be required to include:
- IRS Form 990: As mentioned above, you’ll need to fill out Form 990 annually to maintain your tax exempt status at the federal level.
- Nonprofit bylaws: Many states want to take a look at your nonprofit’s bylaws to see the rules that govern your organization.
- Articles of incorporation: The articles of incorporation are basically your nonprofit’s constitution, which will help the state government understand your guiding principles.
- IRS Letter of Determination: You receive this letter once your 501(c)(3) status has been approved. This way, the state government knows you got federal approval.
- List of officers, directors, and trustees: Some states want to know who is involved with your nonprofit, including those sitting on your board of directors.
- State-specific forms: Each state may require its own set of additional forms based on its own regulations.
- Contracts with independent professionals: If you’re working with third-party consultants to help your nonprofit succeed, you may need to disclose this information to the state government.
As you might imagine, all of this administrative work would take up a lot of your time, between the research, filling everything out, and double-checking that you have it all right. This Labyrinth guide can help you make sure you’re adhering to all of the charitable solicitation regulations, but doing it all on your own might get overwhelming.
If you’re working with a small team or if your nonprofit has gone national, partnering with experts who can manage the process regularly can be a smarter and more efficient choice over the long-run for growing organizations.
3. Stay organized
What is one of the best ways to make sure you’re complying with the registration process? It may seem obvious, but staying extremely organized can make your life a whole lot easier. With so many forms, deadlines, and information to manage, consolidating everything in one convenient location can do a lot to simplify this process.
You’re likely already an organized person if you’re managing donor lists, different outreach strategies, multiple fundraising campaigns, and your staff, so all you have to do is apply the same method to the registration process. Here are some tips for staying organized:
- Keep track of your forms
- Mark deadlines in your calendar, as states have different ones
- Maintain a good filing system
- Schedule time for registration ahead of time
- Give your team access to your filing system
It’s easy to become noncompliant without realizing it, but doing so accidentally will not protect you from the penalties of failing to register. Some of these penalties might include:
- Fines or late fees from the state
- Civil or criminal charges
- Loss of tax-exempt status
- Revocation of fundraising ability
- Confiscated donations or grants
With penalties like these, staying organized is crucial. The last thing you want is to finally have the opportunity to expand your nonprofit, only for the registration process to hold you back. Keeping track of your forms and deadlines in an organized way will ensure that you stay on top of registrations and renewals.
4. Don’t forget online fundraising
The registration process can get even trickier with online fundraising. Let’s say that your organization is based in Colorado, where you do a lot of nature conservatory work. A visitor from New York interacts with your organization while on a trip and then heads home. Moved by your work, this New Yorker decides to make a donation on your website from their apartment in the city. Because of state registration regulations, this donation could pose a problem.
Technically, in order to accept this donation, you would need to be registered in the state of New York, not just in Colorado even though you received the donation online. While it would be impractical for this rule to be strictly enforced, you do still want to follow the regulations in the most streamlined way possible. Some ways you could manage online fundraising compliance include:
- Registering in states with your largest donor bases
- Registering in a handful of state with the highest populations
- Putting a disclaimer on your website that says which states you accept donations from
This rule is why frequently communicating with your donors is so important. For example, if you find that a group of supporters is growing in a state where you aren’t registered, you’ll know to begin the registration process so that you can accept these donations with full compliance. Plus, tailoring interactions with your nonprofit to the needs of your donors can show them that you value their support.
As online fundraising has become more and more important for nonprofits, you want to be sure that your platform remains accessible to passionate supporters. Following these guidelines is the best way to ensure that you do so.
While registering your nonprofit may seem quite daunting and tedious, staying organized and working proactively can ensure that you complete the registration process seamlessly. And if you’re feeling too overwhelmed, you can always off-load the task to experts to handle it for you.
Adhering to nonprofit compliance standards, especially online and across state lines, has its complications, but by following these registration tips, you can make the process as easy as possible.
Author: Dr. Stephen Urich, CEO of Labyrinth
Dr. Stephen Urich is the CEO of Labyrinth, Inc., an organization that assists charitable organizations with all aspects of charity state registration and compliance. He is also a Certified Public Accountant and specializes in nonprofit accounting. He has been working in the nonprofit sector for 25 years.