How to Form a Pennsylvania Nonprofit Corporation in 2023

What is a Nonprofit Corporation?

A nonprofit and for-profit corporation both have similar “nuts and bolts,” so to speak. Both businesses have a board of directors, CEOs, bylaws, annual board meetings, and the like.

But what makes a nonprofit stand out is its purpose. A business corporation typically organizes for financial gain; a nonprofit exists not to make money but to further a cause or reach a goal. Additionally, a business corporation gains investors by offering stock, which has the incentive of dividends and financial gain. Nonprofit corporations solicit contributions that don’t generate any income for those investors.

Well-known nonprofits include groups like Doctors Without Borders, Alcoholics Anonymous, and even your local YMCA.

It’s important not to confuse “nonprofit” with “no income.” Most nonprofits generate income from donations or day-to-day services. The distinction is that nonprofits use 100% of their income to pay expenses and reinvest in their cause. For example, the YMCA uses member dues and community donations for exercise programs, youth sport development, and maintaining their equipment and facilities. They also pay their employees.

Because of this, nonprofit corporations may apply for and receive a tax-exempt status (typically a 501(c)(3) designation), eliminating the corporation’s responsibility for income taxes at the federal and state levels.

Should you form one?

Before you dive into the rest of this guide, you should do a little soul-searching: should you even form a nonprofit in Pennsylvania? The goal is a noble one, but it certainly isn’t for everyone. And some concepts simply aren’t right for the nonprofit sector.

Here are some questions to ask:

• Will I be able to convince others to buy into this cause? How hard will it be to attract donors?
• Are there other existing nonprofits with the same goal?
  • If so, do they operate in Pennsylvania? Nationwide? Should I form a local chapter of their nonprofit instead?
  • Can I further this cause better or differently than they are?
• Can I hire employees for this cause, or will I rely on volunteers? How will I successfully recruit their help?

If you find yourself stumped by any of those questions, you may want to step back and get some help…or simply do some more thinking before diving in. But if you have answers to most of those questions, then you’re well on your way to starting a Pennsylvania nonprofit organization.

Starting a Pennsylvania Nonprofit: Step by Step

Technically, the process for creating a Pennsylvania nonprofit entity is pretty simple. It’s really just a matter of picking a few people and filing some paperwork (it’s the requirements immediately after forming the nonprofit that get complicated).

1. Pick & Claim a Name

Choosing a name is one of the most crucial decisions for starting your business. You want to pick a name that’s memorable, likable, and most importantly, compliant with Pennsylvania state law.

Pennsylvania has pretty simple laws for nonprofit names:

• Your name may be in any language, but it must be expressed in standard, recognizable English characters or Roman or Arabic numerals
• Your name cannot include words related to certain regulated industries, such as insurance, engineering, education, banking, and more
• Your name may not contain profane or blasphemous wording
• Your name must be “distinguishable upon the records,” or distinct form the names of other entities in the state

If you want more information on Pennsylvania nonprofit names, check out the Requirements for names generally section of the Pennsylvania Statutes.

As a result, you have a lot of leeway to pick a name that will resonate with your target audience, potential donors, and of course, with you. The ideal Pennsylvania nonprofit name describes what the organization does, sounds good when said out loud, and just “sticks” in the minds of people who see it.

Whenever you pick a potential name, you should check whether it’s available with a Business Entity Search. Typically, if you type in your desired name and no exact matches show up, then your name is available to use. This seems like a very basic step, but it’s crucial to streamlining your filings.

Once you nail down an available name that you like, you can reserve it using the Name Reservation application. This optional form costs $70 to submit, but once it’s approved, your name will be protected for 120 days. That gives you plenty of time to prepare other business documents without losing your name to another business or nonprofit.

You can learn more through our guide on how to reserve a Pennsylvania business name.

2. Assemble your initial board

A nonprofit corporation is only as impactful as the people leading it. That’s why your initial board of directors is extremely important; you’ll want to pick a team of people that are just as passionate about your cause as you are.

More importantly, it’s helpful to choose a group with complementary strengths. For example, a medical outreach group might have a board of directors with three doctors, a nurse, a financial expert, a creative visionary, and a lawyer. The right board of directors will help your nonprofit thrive.

Pennsylvania doesn’t have a bunch of rules about who can serve on the board. The only explicit requirements are that your board members must be 18 years of age or older (with a few limited exceptions), and you must have at least one director at all times.

For all other terms related to your board of directors, your bylaws can call the shots. For example, your bylaws can dictate the terms lengths for each director, how you’ll replace them, their qualifications, and more.ns) in your company bylaws. You can also dictate how each director is appointed, how long they’ll serve, how they’ll resign, and how you’ll replace them.

3. Appoint a registered agent

Every Pennsylvania entity—nonprofits, corporations, and LLCs alike—must appoint a registered agent. This individual accepts “service of process” from the state on your behalf. Basically, if the state ever needs to notify you regarding a lawsuit or an upcoming annual report due date, they’ll contact your registered agent. The agent forwards that notice to you.

Pennsylvania has pretty lenient criteria for a nonprofit’s registered agent, as found in The Pennsylvania Consolidated Statutes:

• Every entity must list a registered office where one or more people are present to accept service of process during business hours
• The office cannot be a P.O. box
• An entity may also elect to appoint a “registered office provider,” or another business serving as the registered office
• The registered office address must be in-state
• An address must be continuously maintained

So you might ask, “Can I serve as my nonprofit’s registered agent?” Technically, you can. But we don’t recommend it. That puts your personal details (and often private details like your address and primary email) on the public record. You’ll also be busy running your nonprofit and pursuing your goals; you won’t want to tie yourself down to a registered address (especially for a tedious thing like service of process). We recommend appointing an individual you trust.

Or, if you prefer, you can hire a registered agent service instead. For a small annual fee, these services will act as your agent. That frees you up to focus on running your nonprofit.

4. File your Articles of Incorporation

Up until now, your nonprofit has just been an idea; it’s not recognized by the state government. Technically, businesses don’t “exist” until they file the appropriate paperwork. For Pennsylvania nonprofits, that means filing the Articles of Incorporation.

This two-page document requires some foundational information about your nonprofit. Here’s the data you’ll need to have on hand:

• Contact information for returning the approved form
• Your nonprofit’s name
• Name and address of your registered agent
• The nonprofit’s purpose
• Whether the nonprofit is organized on a stock or nonstock basis (and if stock, a description of the authorized shares)
• Whether the corporation will have members or not
• Name and address of each incorporator
• Effective date for the corporation, if designated
• Additional provisions, if desired
• Signature of each incorporator

All told, this form is pretty simple to complete; all you really have to do is fill in the requested information, and you’ll be set to go. If you prefer, you can also file this form online. No matter how you file, you’ll need to have $125 on hand to pay the filing fee.

Processing speed: 10-15 business days

Expedited processing: (only available with in-person drop-off) $100 for 24-hour processing, $300 for 3 hours, and $1,000 for 1-hour turnaround

Congratulations! Your nonprofit is now a recognized entity in Pennsylvania!

Prepare for & Hold Your First Board Meeting

After your Articles of Incorporation form is complete, it’s time to truly get your nonprofit’s activities underway. And that means it’s time for the first board meeting.

No two board meetings will look exactly the same; after all, every nonprofit has different tasks to accomplish. Pennsylvania does expect you to have regularly scheduled meetings for your board, but as for how often, when, where and how those meetings occur—your bylaws can dictate those terms.

For example, your bylaws might require your president and CFO to report on the recent accomplishments and financial standing of the nonprofit. Other nonprofits might take a different approach. For more information on these meetings, please consult the Place and notice of meetings section of the Pennsylvania Consolidated & Unconsolidated Statutes.

Your very first board meeting, however, will look a bit different. Here’s what you’ll need to accomplish:

• Draft and approve the nonprofit’s bylaws: The bylaws dictate exactly how your nonprofit will be run. This includes a detailed rundown of your corporate purpose, how your board will be selected and replaced, how you’ll raise funds, how you’ll hire employees or solicit volunteers, and much more (including a provision for how to amend the bylaws). To save time, you may choose to write a draft before the meeting and revise it when your full board is present. The important thing is that the board approves the final bylaws, making them the governing document for your nonprofit.
• Draft and approve a conflict of interest policy: Occasionally, one of your nonprofit’s contributors will have personal affairs that intersect with the activities of your nonprofit. A conflict of interest policy dictates exactly what happens in those situations, protecting both the nonprofit and the individual contributor.
• Appoint someone to take minutes at each meeting: Every Pennsylvania nonprofit corporation must establish and maintain a corporate record. That’s why every board should appoint someone to take minutes, or a summary of every board meeting, documenting what was said and what decisions were made.
• Finalize responsibilities for each board member: If one board member will be responsible for fundraising while another raises awareness for the cause, you should assign those roles at the initial board meeting.
• Appoint officers for the nonprofit (if needed): Some corporations choose to have their officers, such as the CEO or CFO, be members of the board. Others appoint non-board members to fill these roles, creating a division between the governance and day-to-day operations. Either choice is fine, but these vital roles should be filled.

This initial meeting will be a very full, technical day (or even series of days!), but nailing down these aspects will help you establish a nonprofit that’s compliant with Pennsylvania state law and efficiently run.

Take Care of Taxes

Taxes as a nonprofit are a tricky beast; frankly, we recommend getting advice from a tax lawyer, accountant, or similar consultant to make sure you cover all your bases! But let’s take a quick look at the basics for nonprofit taxes.

First, apply for tax-exempt status on the federal level

If you don’t file for tax-exempt status, you’ll technically be liable for corporate income taxes. And that’s the last thing a non-profit wants. That’s why you’ll need to start out by filing Form 1023 or Form 1024, which are the applications for charitable, religious, or educational groups and other nonprofits respectively. After that application is completed, you’ll play the waiting game. The IRS can take up to 180 days to approve or reject your application, so we highly recommend completing the application correctly the first time.

Once your application is approved, you’ll receive a letter of tax-exempt status from the IRS. This letter gives you an automatic exemption from income taxes on the state and federal levels. However, if you’d like an exemption from the state’s sales taxes, you’ll need to apply for a sales tax exemption certificate. This exemption is only permissible for purchases by the nonprofit, and you’ll need to have the certificate on hand when making purchases.

Obtain an EIN

An EIN, or an Employer Identification Number, is an important identifier to get; it acts a bit like a Social Security Number, but for a business entity. Unfortunately, you aren’t assigned one automatically.

Thankfully, it’s free to apply for an EIN online with the IRS. Even if you don’t plan to have employees right away, it’s a good idea to have this number from the get-go. Miscellaneous forms, such as license applications or even bank accounts, may request this number.

Account for employment & miscellaneous taxes

No two businesses are alike, so each nonprofit will have slightly different taxes. That said, Pennsylvania nonprofits with employees will need to account for withholding taxes and unemployment taxes on the state and federal levels.

There are also miscellaneous industry-specific taxes in Pennsylvania, such as fees for malt beverages, medical marijuana, and more. In most cases, these taxes won’t apply to your nonprofit, but it’s still a good idea to double-check with the Pennsylvania Department of Revenue just to be sure you’ve covered all your responsibilities.

That’s the basic gist of nonprofit taxes in Pennsylvania. We still recommend consulting with a tax professional, as they’ll be able to give you specialized advice for your unique situation.

Register for Licenses and Permits

Licenses and permits are especially important for nonprofits. And there are three major categories of potential permits and licenses: fundraising, lobbying, and licensing. Let’s walk through Pennsylvania’s requirements for each of those three areas.

1. Fundraising

A lot of states require you to register in order to solicit charitable contributions, and Pennsylvania is no exception. Before soliciting contributions, you’ll have to register with the Department of State. Registration and renewal fees vary depending on how much revenue you make in contributions each year. So for your first year, your registration fee will be just $15. Renewal can be as high as $250 in subsequent years. For more information, please consult the Charities Registration Forms page from the Department of State.

2. Lobbying

If your nonprofit will be lobbying for its cause in a formal capacity, then you’ll need to ensure that each person lobbying has the appropriate registration. Pennsylvania’s Department of State manages this registration—one for each person conducting lobbyist activities. The registration itself is pretty simple.

The more complicated part of lobbyist registration is the requirement to submit regular reports to the Department of State. These reports detail a lobbyist’s activities and expenditures, and they’re due once a quarter. For more information about these reports, check out the Lobbying Disclosure page.

3. General licensing

Nonprofits are tax-exempt, but they aren’t exempt from licensure requirements, whether that’s for an industry-specific license or a state general business license. So you’ll need to get the licenses that apply to your unique organization.

Pennsylvania, unlike some states, doesn’t have a general business license that every entity in the state needs to get. A few cities and counties require general licenses, though, so we do recommend consulting with your local government to verify the requirements in your area.

As a result, the bulk of Pennsylvania licensing comes at the industry level instead. The state upholds all federally regulated industry licenses, and the Bureau of Professional and Occupational Affairs is a great place to check out the state-level license requirements. It’s up to you to learn if there are any licenses for your industry, so be sure to complete this step!

Whenever you apply for a license or permit, we recommend inquiring about the requirements for renewing your licenses. That way, you’ll know exactly how often you’ll need to renew your licenses (if applicable).

Meet Insurance Requirements

We highly recommend that every business entity maintain at least some sort of general liability policy — even nonprofit entities. There’s always a chance that something can go wrong (no matter how careful you are).

A natural disaster can happen, a break-in might cost you some important equipment, or an accident during day-to-day operations might cause a broken bone and damaged property. A general liability policy will protect your business if something like that happens.

Pennsylvania state law also requires you to get a workers’ compensation insurance policy if you have employees working for your nonprofit. You can learn more about this requirement with the Department of Labor and Industry.

Top Resources for Pennsylvania Nonprofits

Nonprofit work isn’t always easy, but you never have to go it alone! There are dozens, if not hundreds of nonprofit resources available to Pennsylvania organizations.

On the national level, there’s the National Council of Nonprofits. They exist to advocate for and strengthen nonprofits throughout the country by providing nearly comprehensive resources, teaming up with each state’s nonprofit network, and keeping you aware of the trends in policy and public opinion. It’s also a great place to peruse the latest reports and data about charitable giving and advocacy in the U.S.

On the state level, you can always turn to the Pennsylvania Association of Nonprofit Organizations. In their own words, PANO “amplifies the impact of the community benefit sector through advocacy, collaboration, learning and support.” PANO does require membership, but joining grants you several advantages, including advocacy opportunities, consulting, training, and more, so joining will be worth your while.