Illinois, also known as the Land of the Presidents, is a state with a varied population and a growing number of thriving nonprofits. The number of Chicago nonprofits alone (51,940 to be exact), is inspiring to the level of diverse needs and success of not for profit organizations and associations in the state.
If you want to know how to start a nonprofit in Illinois, here are the important steps to getting your organization or association up and running smoothly and quickly.
- What is a nonprofit organization?
- What is a nonprofit association?
- How long does it take to start a 503c nonprofit?
- How much does it cost to start a nonprofit?
- 17 steps to starting a nonprofit in Illinois
What is a nonprofit organization?
A nonprofit organization is a group focused on achieving a specific goal or purpose, and is a larger group that’s typically more formal with a structured hierarchy. The organization’s income is not given to its members, directors, or officers.
What is a nonprofit association?
Unlike a nonprofit organization, a nonprofit association has no hierarchy and exists to further a specific idea, industry, or profession’s interests and to share information and resources. In Illinois, the definition of a nonprofit association is as follows:
‘“Association” or “common interest community association” means the association of all the members of a common interest community, acting pursuant to bylaws or an operating agreement through its duly elected board of managers or board of directors.”’
Not all nonprofit associations will fall under the 501(c)(3) tax status. For example, if your nonprofit association is focused on supporting the business activities and interests of its members, it will qualify for 501(c)6 status.
How long does it take to start a 503c nonprofit?
Tax exemption forms can take 3-12 months alone for the IRS to process and contact you. However, there are nonprofits who have launched in less than a year. It just takes organization, planning, and knowledge of the essential requirements.
How much does it cost to start a nonprofit?
In Illinois, creating a nonprofit organization or association has starting costs of:
- Articles of Incorporation: $50 via mail or $77.75 online + expedite fee $100 (optional)
- Form REG-1: Cost is dependant on state tax accounts
- 501(c): $275 or $600 IRS fee
- Illinois Charitable organization Registration: $15 fee
17 steps to starting a nonprofit in illinois
We’ve taken the stress out of launching your Illinois nonprofit by breaking up the process into 17 essential steps. Consider this your 501(c)(3) formation checklist:
1. Give your organization a name
Before choosing your nonprofit’s name make sure it doesn’t already exist by checking the Illinois Secretary of State nonprofit search. The nonprofit naming requirements in Illinois are:
- Can contain “corporation,” “company,” “incorporated,” or “limited,” or an abbreviation of these words
- Must contain “NFP” if name implies or indicates a purpose other than a nonprofit or specific organization detailed under Illinois’s General Not For Profit Corporation Act of 1986.
For more information, see Article 4. Name of Illinois General Assembly’s (805 ILCS 105/) General Not For Profit Corporation Act of 1986.
Some examples of existing nonprofits in Illinois include:
- Greater Chicago Food Depository
- National Kidney Foundation of Illinois (NKF)
- Epilepsy Foundation of Greater Chicago
- Chicago Community Trust
2. Choose your mission statement
Your mission statement defines your not for profit organization’s purpose and its overall goal. Here’s an example of a mission statement from Assata’s Daughters in Chicago:
“Assata’s Daughters (AD) is a queer Black woman-led and youth-focused organization rooted in the Black Radical Tradition. AD organizes young Black people in Chicago by providing them with political education, leadership development, and revolutionary services.”
3. Identify your vision and values
Your vision is an inspirational statement that covers the direction your nonprofit wants to go in and includes future objectives to accomplish.
Take this example from Ronald McDonald House Charities: “A world where all children have access to medical care and their families are supported and actively involved in their children’s care.”
Your values are what your organization and members stand for. Here’s an example from Chicago’s Ravenswood Community Child Care Center:
- Community
- Diversity
- Lifelong learning
- Quality
- Respect
4. Create a business plan
Your business plan defines your nonprofit’s direction, budget, costs, and restrictions. Sections of it can also be used for your tax exempt status application.
Elements of a business plan include:
- Executive summary
- Products, programs, and services
- Marketing plan
- Operational plan
- Impact plan
- Financial plan
For more information on building your nonprofit business plan, see the Council of Nonprofits’ guide to business planning for nonprofits.
5. Choose your incorporators, directors, and officers
In the state of Illinois, your nonprofit organization or association will need:
- At least one incorporator, responsible for signing Articles of Incorporation
- At least three directors for a nonprofit organization or association.
- Need at least 1 officer, responsible for certifying corporate records (secretary)
Illinois requirements dictate that in order to be eligible as a board member, the individual does not need to be a state resident or a member of the organization.
6. Recruit your registered agent
A registered agent acts as your nonprofit organizations or association’s representative to the Illinois Secretary of State and receives legal notices on its behalf.
The Illinois requirements for a nonprofit registered agent are:
- Must live and have physical office in Illinois
- Must be at least 18 years of age
- Must hold regular business hours and be present during those hours
7. File your articles of incorporation
Your articles of incorporation are documents that establish where and when your nonprofit was formed and contain information that verifies your nonprofit’s existence. In order to file for Illinois articles of incorporation, you’ll need to:
- Complete FORM NFP 102.10.
- Information such as:
- Name
- Purpose
- Board of Directors’ members
- Adherence to IRS language conventions. There are no specific wording requirements for FORM NFP 102.10 for Illinois, but adhering to IRS suggested language requirements help you avoid having to make changes or running into issues when filing for 501(c)(3) exemption and other documents.
- Submitting this form by mail, fax, or online.
- Mail or Fax: Can take up to two weeks. Cost is $50.
- Online: $77.75, Can take 1-5 business days if pay $100 expedite fee.
- Information such as:
8. Receive Employer Identification Number (EIN)
Your nonprofit’s Employer Identification Number (EIN) is a unique 9-digit number that’s designated by the IRS. It’s a necessity even if you don’t intend to hire employees. It allows your nonprofit organization or association to:
- File taxes
- Open a bank account
- Apply for tax exemption
You can apply for your EIN through IRS Form SS-4.
9. Keep nonprofit documents on file
It’s important to keep a record of official documents in a secure, unified place. It’s worthwhile investing in a digital storage solution with backups. Keep copies of:
- Bylaws
- Conflict of Interest policy
- Employer Identification (EIN) number
- 501(c)(3) determination letter
- Board meeting minutes
10. Create your governing policy documents and conduct your first Board of Directors meeting
During your first meeting, make sure your board meeting agenda includes:
- Approving and establishing bylaws, which define how your organization will operate. The Illinois nonprofit bylaws requirements are:
- Need to include essential information such as name, address, and purpose.
- Should outline rules for internal operations
- Need to include guidelines for adjusting board members
- Approving and establishing your conflict of interest policy, which prevents situations where competing interests can potentially harm your organization.
- Electing directors and appointing officers.
Both your bylaws and conflict of interest policy are required by the IRS for 501(c)(3) exemption.
11. Apply for Illinois State Tax Identification Numbers and/or accounts
Your nonprofit needs an Illinois State Tax Identification Number in order to get that sales tax exemption. Sales tax exemption means your nonprofit will not have to charge tax on the sales of goods and services. You’ll need to fill out Form REG-1: Illinois Business Registration Application.
12. Obtain 501c Tax-Exempt Status
501(c) status is an IRS designation that means your nonprofit association or organization is exempt from paying federal income taxes. Additional benefits include:
- Tax-deductible contributions
- Ability to apply for grants
- Reduced postal rates
501(c)(3) is the most common type of 501(c) status for nonprofits, but there are other subtypes depending on your nonprofit’s purpose and operations. For more information, see the IRS Exempt Organization Types list.
The Illinois 501(c)(3) requirements are that the nonprofit must be:
- Organized – As corporation, LLC, unincorporated association, or trust.
- Operated – Must be operational under one or more exempt purposes.
- Legislative and political campaign intervention – 5013(c) status will be denied if the nonprofit’s activities predominantly influence legislation and/or participation and intervention with political campaigns.
To get 501(c)(3) status as an Illinois nonprofit, you’ll need to:
- Fill out form either:
- Form 1023
OR - Form 1023-EZ – A streamlined version of Form 1023 that can only be filled out by eligible nonprofits based on the criteria and worksheet provided on the Form 1023-EZ form.
- Pay applicable fees:
- Form 1023 – Fee is $600. You will receive your letter of determination in 3 – 6 months.
- Form 1023 EZ – Fee is $275. You will receive your letter of determination in less than a month.
13. Apply for Illinois tax exemptions
After your nonprofit has received its letter of determination and its Illinois state tax identification number, you’ll need to apply for Illinois state tax exemption by filling in Illinois STAX 1 – Application for Sales Tax Exemption.
Details from your business plan can be used for sections of this application. Remember to use the same IRS approved language to guarantee your application’s approval.
14. Register your nonprofit as a charity
As required by the state of Illinois, your nonprofit organization or association will need to register as a charity every year. Your registration form and required documents need to be submitted within 6 months of your fiscal year. For more information on how to register a nonprofit organization in Illinois see the state’s Charity Registration page.
15. Obtain additional business licenses and permits
If you plan to host fundraising events as a source of non-dues revenue that involve bingo, poker, or other similar activities, the state of Illinois requires your nonprofit to register with the Illinois Department of Revenue – Office of Bingo and Charitable Games and comply with the Illinois Charitable Games Act. The cost of a 2-year license is $400 and you must register 30 days before your event.
16. Hire staff
Your staff plays a big role in the success of your nonprofit. They help with logistics, planning, donor relations, and fundraising efforts. Use your network, board of directors, or resources like NPO.net to find staff that will help you with your operations. Hire for roles such as:
- Marketing and Communications Manager
- Development Director
- Events Manager
- Member Experience Leader
17. Choose your nonprofit software
Having the right software is an important part of the early days of your nonprofit because it helps:
- Automate administrative tasks, saving time and money
- Handle and organize online payment processing and membership dues reminders
- Add ease to event and conference planning
- Improves member engagement and member experience
- Offers valuable data analysis and reporting
- Increases revenue and more.
Ideally, look for an all-in-one nonprofit membership software like Memberclicks that can help you achieve your goals while building relationships with members for long-term success. By investing in a software that can handle all aspects of your organization, you’re not only getting features that support your nonprofit during its early days, you’re getting a software partner that can grow with it.
Start your Illinois nonprofit with the right tools and support
As you build your nonprofit, it’s important to stay organized, plan in advance, and have the right software to support you in your journey. Starting a nonprofit isn’t a process that should be rushed. Use any excitement and anticipation into carefully honing each part of your nonprofit, whether that be defining your board member responsibilities or writing your vision statement. Remember, when you put care into creating your nonprofit, you’re establishing a strong foundation for success and growth.
Recommended Reading:
- 15 Elements of Successful Nonprofit Membership Programs
- Your Complete Membership Management Guide for 2022 and Beyond
- 50 Ways to Increase Membership for Associations or Nonprofits
- How to Create and Name Membership Levels
- Nonprofit Board Member Responsibilities and Roles 101
- The Best Social Media Tools for Nonprofits in 2023
- The 50 Best Nonprofit Websites To Get You Inspired
- 15 Quick & Easy Fundraising Ideas for Nonprofits and Clubs
