Starting a nonprofit in Illinois can be an incredibly rewarding experience — especially if you’re passionate about a cause in your community.
But just like starting a for-profit business, starting a nonprofit takes some thought and effort, as well as a bit of paperwork. In this blog, we’ll cover everything there is to know about starting a nonprofit in Illinois, so you can begin making an impact in no time.
12 steps to create a nonprofit in Illinois
- Step 1: Research and plan
- Step 2: Name your organization
- Step 3: Recruit a leadership team
- Step 4: Appoint a registered agent
- Step 5: File the Articles of Incorporation
- Step 6: Apply for an EIN
- Step 7: Create bylaws
- Step 8: Apply for federal and state tax-exempt status
- Step 9: Register for charitable fundraising
- Step 10: Obtain other necessary permits and licenses
- Step 11: Start fundraising
- Step 12: Stay compliant
Step 1. Research and plan
When considering starting a nonprofit in Illinois from scratch, it can be hard to know where to begin. When deciding to take on the endeavor, it is important to get clear on a few fundamental things, including:
- Community needs: Consider what problems you want to address or what positive changes you want to make.
- The market: Research nonprofits in Illinois land that work in similar areas or address similar issues. Identify any gaps or needs that your nonprofit could address.
- Your goals: Clarify your nonprofit's specific goals and objectives. Determine what you hope to achieve in the short term and long term.
- Your mission statement: Write a clear and concise mission statement that articulates who you are, what you do, and who you serve.
- Feedback: Seek feedback from stakeholders, potential beneficiaries, and members of your community to ensure that your mission statement accurately reflects community needs.
Step 2. Name your organization
Once you’ve determined your organization’s core mission and goals, it’s time to name your nonprofit. Not only is this step in the process important for marketing and branding purposes, but it’s also a crucial part of the legal process of starting a nonprofit in Illinois.
When deciding on your organization’s name, be sure to choose a name that:
- Reflects your mission and goals
- Describes what you aim to do
- Is easy to spell and pronounce
- Offers room for future growth
Per Illinois state rules, you’ll also need to include the words "corporation," "company," "incorporated," or "limited," or an abbreviation of one of such words in your name as well.
Once you’ve determined your name, search for it on the Illinois Secretary of State website to ensure that no other organization has it. Per Illinois state rules, you’ll need to have a unique name.
Step 3. Recruit a leadership team
Once you’ve determined your organization name and confirmed that it is not already in use, it’s time to create a leadership team.
Identifying an Incorporator and a Board of Directors is not only a strategic decision that can help make your nonprofit a success, but it’s a required one in Illinois.
- Incorporator: Nonprofits must recruit at least one Incorporator who will be responsible for signing the Articles of Incorporation.
- Directors: You must assemble a board of at least three directors who will help guide your nonprofit through strategic decision-making.
When choosing your leadership team, be sure to select people who are trustworthy, dependable, and bring a skillset to the table. Whether they’re already a member of your organization or a trusted volunteer, they’ll help you make crucial decisions about your charity.
Step 4. Appoint a registered agent
Appointing a registered agent is a vital step when forming a nonprofit in Illinois. In essence, a registered agent acts as a reliable point of contact for legal matters. This designated individual receives important documents and official correspondence on behalf of your nonprofit, such as legal notices and tax forms.
The registered agent must be located in Illinois and available during regular business hours to receive legal correspondence and communication.
Step 5. File the Articles of Incorporation
One of the most crucial steps in starting a nonprofit in Illinois is filing the Articles of Incorporation on the Illinois Secretary of State website. This will officially establish your nonprofit as a legal entity in the state.
Nonprofits can file the Articles of Incorporation by mail ($50), fax, or online ($75).
Step 6. Obtain an EIN
In Illinois, like in other states, nonprofits are required to obtain an EIN, or Employer Identification Number. An EIN is like your organization's social security number. It's used for tax purposes, including opening bank accounts, hiring employees, and applying for tax-exempt status.
To get an EIN, you can apply online using the IRS Form SS-4 on the IRS website or submit it by mail. The application process is free, and you'll receive your EIN shortly upon approval.
Step 7. Draft bylaws
Next, you’ll need to call a meeting with your board to draft bylaws that align with your mission and comply with Illinois nonprofit laws.
Bylaws are the rules and procedures that govern how your nonprofit operates. They outline the structure of your organization, the responsibilities of the board and officers, how meetings will be conducted, and how decisions will be made.
When creating your bylaws, be sure to:
- Use clear and concise language: Make the language easy to understand for all board members and stakeholders. Avoid jargon and overly complex language.
- Make them comprehensive: Your bylaws should cover all essential aspects of your organization's governance, including board structure, officer roles, meeting procedures, decision-making processes, and conflict resolution mechanisms.
- Alignment bylaws with mission and values: Ensure that the bylaws reflect and support the goals of the organization.
- Consider flexibility: Include provisions that allow for amendments to the bylaws as the organization evolves and grows.
- Outline board structure and responsibilities: Clearly define the board of directors, its qualifications, terms of office, and responsibilities.
- Determine meeting procedures: Detail the frequency, notice requirements, quorum, voting procedures, and more.
- Address finances: Establish guidelines for budgeting, accounting, and reporting requirements.
- Create a conflict of interest policy: Include a conflict of interest policy that requires board members and officers to disclose any conflicts of interest and abstain from voting on matters in which they have a personal or financial interest.
- Include dissolution procedures: Include provisions for the process of distributing assets and winding up affairs in accordance with state law and IRS regulations.
Step 8. Apply for federal and state tax-exempt status
Once you’ve created your bylaws, you’ll need to apply for both federal and state tax exemption.
- Federal tax-exempt status: Fill out Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. You’ll need to provide detailed information about your nonprofit's activities, finances, and governance.
- State tax-exempt status: When and if your corporation receives a federal tax exemption, you are automatically exempt from Illinois income tax. To recieve sales tax exemption, fill out Form REG-1 online, by mail, or in-person with the Illinois Department of Revenue.
Step 9. Registered for charitable fundraising
Next, your nonprofit will have to register for charitable fundraising. Though not all states require this step, Illinois does. Your nonprofit must file this within six months of the last fiscal year — it will cost $15.
Step 10. Obtain other necessary permits and licenses
Once you’ve completed all the necessary filings, you’ll need to consider whether you need any other permits.
For example, if your nonprofit intends to use games of chance (such as lotteries) in its fundraising efforts, you’ll need to acquire special permitting through the Illinois Department of Revenue - Office of Bingo and Charitable Games. You also need to act in accordance with the Illinois Charitable Games Act.
Step 11. Start fundraising
Once you’ve filed all of the appropriate forms and established the necessary regulatory foundation for your nonprofit, it’s time to start fundraising.
First, build a fundraising plan that outlines your goals, strategies, and tactics. Plus, be sure to consider how you’ll cultivate donor relationships. Then, Put your fundraising plan into action by launching campaigns, events, and appeals to solicit donations and support. Keep track of your fundraising efforts and evaluate their effectiveness over time.
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Step 12. Stay compliant
As a legal nonprofit in the state of Illinois, you’ll need to remain compliant with federal and state rules and regulations throughout the year. This includes:
- Maintaining records: Keep accurate and up-to-date records of your nonprofit's activities, finances, and governance. This includes meeting minutes, financial statements, tax filings, and other important documents.
- Filing annual reports: File annual reports with the IRS to maintain your nonprofit's legal and tax-exempt status.
- Staying informed: Stay informed about changes to Illinois state laws and regulations affecting nonprofit organizations. Attend training sessions, workshops, and webinars to learn about best practices and compliance requirements.
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Learn how this Illinois nonprofit raised $50k for free
The St. Germaine Catholic School — a nonprofit association in Illinois that is dedicated to the education of children in the community — needed a creative solution for raising money for their programs. While their supporters were accustomed to one-time donations and recurring giving, this nonprofit wanted to shake things up in order to boost supporter engagement and bring more donations in the door.
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How to start a nonprofit in Illinois FAQs
How much does it cost to start a nonprofit organization in Illinois?
The price of starting a nonprofit in Illinois can vary. However, there are a few common costs to be aware of:
- Incorporation fees: To establish a nonprofit organization in Illinois, you'll need to file Articles of Incorporation with the Illinois Secretary of State. The filing fee for Articles of Incorporation is typically around $50 to $75, depending on your filing method.
- Legal fees: Many organizations choose to seek legal assistance when incorporating a nonprofit. If you choose to enlist legal help, it can cost several hundred to a few thousand dollars.
- IRS application fee: The application fee for Form 1023 is based on the organization's annual gross receipts and typically ranges from $275 to $600. Form 1023-EZ has a lower fee, currently $275.
- Registered agent fees: Some organizations hire professional registered agent services, which typically charge an annual fee ranging from $50 to $300.
- Charitable registration: Illinois nonprofits must pay $15 annually in order to solicit charitable contributions from the public.
- Charitable gaming license: Illinois nonprofits must pay $400 in order to use games of chance as a form of fundraising.
How do I start a nonprofit with little money?
Starting a nonprofit organization with no money requires strategic planning. To cut down on costs, consider:
- Using volunteers: Leverage volunteers for administrative, fundraising, or program work, to reduce the need for paid staff.
- Seeking out in-kind donations and grants: Ask for donations of goods and services from businesses, individuals, or other organizations to support your nonprofit's activities (think office space or equipment). And, research grant opportunities to generate free financial support for your nonprofit's mission.
- Leveraging partnerships: Look for potential partners, such as other nonprofits or community organizations, who might want to collaborate on shared goals.
- Taking advantage of free tools and platforms: Be sure to use fundraising and donor engagement tools that are completely free to use, like Zeffy. That way, you’ll never have to worry about hidden fees and can get started making an impact right away — without paying a cent.
How long does it take to start a nonprofit in Illinois?
The timeline for starting a nonprofit organization in Illinois can vary depending on several factors:
- Preparation and planning: This initial phase involves conducting research, developing a mission and vision, recruiting board members, drafting bylaws, and completing other necessary preparations. The length of this phase can vary depending on the organization's level of preparedness and the availability of resources.
- Incorporation: The next step is to file Articles of Incorporation with the Illinois Secretary of State to officially establish the nonprofit organization. The processing time for Articles of Incorporation can range from a few days to a few weeks, depending on the volume of filings and the method of submission (e.g., online or by mail).
- Obtaining federal tax-exempt status: If the organization intends to seek federal tax-exempt status under section 501(c)(3) of the Internal Revenue Code, it will need to file Form 1023 or Form 1023-EZ with the IRS. The processing time for these applications can vary, but it generally takes several months for the IRS to review and approve the application.
Overall, the process of starting a nonprofit organization in Illinois can take anywhere from several months to over a year, depending on the specific circumstances of the organization and the efficiency of the application process. It's important for organizations to plan ahead in case processes are delayed.
How many board members are required for a nonprofit in Illinois?
The state of Illinois requires that all nonprofits have at least three directors.
Can I pay myself as a founder of a nonprofit?
Here are some ways nonprofit founders can pay themselves:
- Salary or wages: Nonprofit founders can receive a salary or hourly wages for their services, similar to employees of the organization.
- Reimbursement for expenses: Nonprofit founders can be reimbursed for reasonable and necessary expenses incurred in the course of their duties, such as travel expenses, office supplies, and professional development costs.
- Consulting or contractual arrangements: Nonprofit founders may enter into consulting or contractual agreements with the organization to provide specific services or expertise on a project basis.
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