Now, all that remains is to compare the best nonprofit formation services head to head.
Most of the top 5 nonprofit formation services follow a 3-series structure. That’s why we chose to arrange them by basic, traditional, and supreme packages for consistency’s sake.
The only exceptions are Northwest Registered Agent and Harbor Compliance.
Northwest’s package is fully customizable so we only compare its most basic offer without the added services.
Harbor Compliance doesn’t have corresponding filing packages, simply formation and compliance packages so organized them accordingly
With that being said, let’s see how these online formation services compare head to head.
Frequently Asked Questions
Forming a nonprofit can be a headache, but it doesn’t have to be. With online nonprofit formation services, filing your nonprofit is a breeze.
Whether you choose to file your nonprofit yourself of with a professional formation service, we answered a series of questions that we felt needed to be addressed.
Take a second to check them out.
What is a Nonprofit?
A nonprofit organization is a legal entity that operates to benefit the community instead of generating income.
If you intend to further a social cause instead of making money, a nonprofit is an ideal vehicle to get you there.
What are the Differences Between a Nonprofit and a For-Profit?
A nonprofit is all about benefiting society. In contrast, a for-profit organization is oriented to generate profit for its shareholders.
There is also a big difference in how nonprofits and for-profit organizations are funded.
Nonprofits tend to rely on donations to raise money and fund operations. For-profits on the other hand, usually rely on stock issuing and bank loans.
In addition, certain restrictions about how much the staff a nonprofit can be paid do not apply to for-profits.
And last, nonprofits are often not taxed at all on income from donations, while for-profits can have tax breaks, but are absolutely taxed on income.
Can a Nonprofit Make a Profit?
A nonprofit organization (contrary to its name) is totally allowed to make a profit.
The only difference here (and what mostly defines a non-profit) is that you cannot distribute the profit to the founders or board of directors.
What are the Steps Involved in Forming a Nonprofit?
Below are the steps that you must follow in order to form your nonprofit and keep it running:
#1 You choose a name and let a formation service company do an availability search
They will search through the state databases to make sure your nonprofit’s name isn’t taken.
#2 Prepare and file the articles of incorporation with the state
The articles of incorporation are documents that establish the existence of your nonprofit. It’s actually the main process that “forms” any organization.
They are usually handled by formation service providers like the 5 companies we mentioned here or lawyers.
#3 You create nonprofit bylaws
Nonprofit Bylaws create a picture of how your nonprofit will be governed. They include details like the way officials are elected and how assets are going to be used in case your nonprofit dissolves.
#4 Obtain an Employer Identification Number (EIN)
The formation service that forms your nonprofit can get your EIN for you. For nonprofits, an EIN is mandatory, and it will allow you to open a bank account for your nonprofit, hire people, and apply for licenses.
#5 Hire a registered agent to receive compliance documents
A nonprofit must comply with regulations just like an ordinary business does. You will need to hire a registered agent to receive the related documents in the states you’ll be operating in.
#6 You file a 501c3 form with the IRS to make your nonprofit tax-exempt
Either through a formation service provider or a lawyer, you must first file a 501c3 form with the IRS if you want your nonprofit to be tax-exempt.
#7 Get necessary licenses/permits for operating
Depending on the state you would like your nonprofit to operate in, you will need to get the related licenses. You do this either by applying through a formation service company or a lawyer.
#8 Comply with regulations/guidelines
In order to keep your nonprofit operating, you will need to make sure you comply with the compliance regulations of the state you operate in.
#9 Registration as a charity (if you want)
If you want you can use a lawyer or formation service provider to register your nonprofit as a charity. This is the only way to properly receive donations and you don’t get it by default when you form a nonprofit
What are the Advantages/Disadvantages of a Nonprofit?
Separate legal entity
The organization can enter and exit contracts, sue and be sued, and carry the weight of its liabilities by itself.
What this means is that the founders, the board of directors, and managers are not personally liable for any damages incurred by lawsuits, debt, etc.
A nonprofit, unlike a for-profit, can file for tax-exemption. You also get the added benefit of the donations being tax-deductible; donors may be even more incentivized to donate this way.
Access to grants
Unlike for-profits (with exceptions), nonprofits are the only organizations that have access to grants. The sources can range from foundations to even the government.
Increased credibility for donors
Having a nonprofit makes your cause look more official. This way, it can increase your credibility (and therefore the number of donations).
US postal service discounts
In many cases, you can apply for special discounts on bulk mail services.
Though, as you can see it’s very cheap to form a nonprofit, making it tax-exempt can be costly. In many instances, the price is above $500 for filing the 503c3 document but it varies with the state.
Just like a for-profit organization, a nonprofit must comply with certain guidelines.
More strict regulations regarding the management
When it comes to how the board of directors and management operate, regulations can be stricter for a nonprofit.
Forming a nonprofit can make a dream come true whatever the cause that dream entails. The 5 companies that we outlined here can get you there in no time.
Keep in mind that whichever you choose from the above, you will be in good hands. You really can’t go wrong here.
The point is to keep into account your budget and what extra-legal services you might need while trying to decide.
But take our recommendations for which package you should select seriously, that way you won’t end up paying for something you don’t really need.
Now, we want to thank you for reading this article and ask you to share it if you think it helped you.
Also, please ask us anything you want and we’ll try to get back to you as soon as possible!