Starting a nonprofit often begins with incorporating (i.e. forming) a nonprofit corporation under the laws of a state. The Delaware nonprofit nonstock corporation is one of the best nonprofit corporation options in the United States. Most 501c3 and other 501c tax-exempt organizations, charities and NGOs, operating under Delaware rules, can begin here.
You may have heard of the Delaware advantage for businesses. This is because Delaware has one of the most permissive corporate laws in the nation. Many other states impose extensive restrictions on nonprofit corporations formed under their laws. The Delaware nonprofit corporation law is the same as its business corporation law.
A Delaware nonprofit corporation provides the same personal liability protection benefits that all nonprofit corporations provide. However, when you incorporate in Delaware, you avoid the bureaucracies that other state nonprofit corporation laws impose. Many national and international nonprofits choose Delaware for this reason.
New York has one of the most restrictive and bureaucratic nonprofit corporation laws in the United States. This is why we provide Delaware as an option for our New York clients.
Charitable nonprofit corporations incorporated under New York law are subject to heavy regulation by the New York attorney general. To expand its mission, it must obtain the consent of the attorney general. To reorganize or move to a different state, it must obtain the consent of the attorney general. To close down, it must obtain the consent of the attorney general. A Delaware nonprofit corporation does not have to jump through these hoops. This is true even if the Delaware nonprofit is operating solely in New York.
New York mandates the number and qualifications of directors and members of nonprofit corporations formed under its laws. New York prohibits single member nonprofits, requiring member nonprofits to have at least three members. It requires directors to be at least 18 years old, except in certain circumstances. It requires at least three directors. It also requires much more complicated bylaws provisions to protect the nonprofit founder and the founder’s vision. None of these are the case for a Delaware nonprofit corporation.
Where New York really excels, compared to Delaware, is in cost. Delaware requires a registered agent to be maintained in the state (at least $45/year). Delaware nonprofit corporations also must pay an annual report filing fee of $25. New York does not impose these costs on nonprofits formed under its laws. Delaware nonprofits that conduct activity in New York must also file a New York application for authority, which increases the overall start-up costs. That being said, in the long run, if cost is not a factor, the Delaware is the superior choice.
Delaware Nonstock Nonprofit Corporation Incorporation Package
Package includes the following:
- Draft of the certificate of incorporation to form Delaware nonprofit corporation, in compliance with Delaware nonprofit law and federal tax law.
- File the certificate of incorporation with the Delaware Secretary of State.
- Provide basic non-member nonprofit corporate bylaws, in compliance with Delaware nonprofit law, federal tax law, and nonprofit best practices.
- Provide basic nonprofit conflicts-of-interests policy, in compliance with federal tax law safe-harbors, if appropriate.
- Prepare statement of incorporator.
- Draft initial resolutions of directors.
- Apply for Employer Identification Number (EIN), if requested.
Legal Fee*: starting at $1,688
*Legal fee is an estimate representing what we normally charge clients to form a standard Delaware nonprofit nonstock corporation from start to finish. If a more complex institutional structure is required, or special provisions such as anti-takeover measures need to be made, fees may be higher. We are usually able to offer this service for a flat-fee once we’ve had the opportunity to discuss with you your vision for the nonprofit. Quote does not include state fees, which as of February 2018, are between $139 and $239.