Starting a nonprofit is a meaningful step, but keeping it in good standing requires ongoing attention. With state filings, federal requirements, charitable registrations, and other compliance obligations to manage, it can be easy to miss an important deadline, especially when you are already focused on serving your community. Organizations looking for guidance may turn to Beacon nonprofit consulting for support with their nonprofit compliance needs.
The good news is that staying compliant does not have to feel overwhelming. By understanding which requirements apply to your organization and keeping up with them throughout the year, you can avoid unnecessary penalties, protect your nonprofit’s status, and focus more of your time and resources on your mission.
Here we will explain the key compliance requirements you need to stay on top of to keep your nonprofit in good standing.
Maintain State Registration
Most nonprofits must file an annual or periodic report with their state. The report may require updated information about the organization’s:
- Legal name
- Principal office
- Registered agent
- Directors and officers
- Contact information
Deadlines and fees vary by state. Missing a filing can result in late fees, administrative dissolution or loss of authority to operate.
If the nonprofit operates in other states, it may also need foreign registrations.
Keep Registered Agent Information Current
A nonprofit must maintain a registered agent and registered office in its formation state. The agent receives lawsuits, government notices and other official documents.
Update the state record promptly if the agent resigns, moves or changes its legal name.
File the Correct Form 990
Most federally tax-exempt organizations must file Form 990-N, 990-EZ, 990 or 990-PF each year, depending on their classification, gross receipts and assets.
Form 990-series returns are generally due on the 15th day of the fifth month after the organization’s accounting period ends. For calendar-year organizations, the deadline is usually May 15.
Failing to file the required return or notice for three consecutive years results in automatic revocation of federal tax-exempt status.
Renew Charitable-Solicitation Registrations
Many states require nonprofits to register before soliciting donations from residents. Requirements may apply to online appeals, emails, social media, direct mail, events and other fundraising activities.
A nonprofit soliciting in multiple states should determine where registration, annual renewals and financial reports are required. Federal 501(c)(3) recognition does not replace state charitable-solicitation registration.
Follow the Articles and Bylaws
The board should follow the organization’s Articles of Incorporation, bylaws and applicable state law when conducting meetings, elections and votes.
Keep records of:
- Director and officer appointments
- Budget approvals
- Major contracts
- Compensation decisions
- Related-party transactions
- Policy changes
- Program or governance changes
Review conflicts of interest and document decisions involving directors, officers or other insiders.
Protect Charitable Funds
Keep nonprofit finances separate from personal accounts. Payments should have a clear organizational purpose, supporting documentation and appropriate approval.
Track restricted donations and grants separately and use them only for their stated purposes. Regularly reconcile bank accounts, review spending against the approved budget and provide financial reports to the board.
A 501(c)(3) organization cannot use its earnings for the private benefit of founders, directors or other insiders. Compensation is allowed when it is reasonable and paid for genuine services.
Meet Tax and Employment Obligations
Tax-exempt status does not eliminate every tax obligation. Depending on its activities and location, a nonprofit may have obligations involving:
- Payroll and employment taxes
- Unrelated business income tax
- Sales or use tax
- Property tax
- State unemployment contributions
- Local taxes or fees
State tax exemptions may require separate applications or renewals.
Maintain Required Records
Provide donors with the acknowledgments and disclosures required for their contributions.
Many exempt organizations must also make their exemption application and recent Form 990-series returns available for public inspection.
Maintain financial, governance, employment and donor-restriction records according to a written record-retention policy.
Report Organizational Changes
Update the appropriate state and federal records when the nonprofit changes its:
- Address
- Legal name
- Responsible party
- Purpose
- Governing documents
- Major activities
Significant changes in activities may affect tax exemption, licensing or Form 990 reporting requirements. Changing the bylaws does not automatically update government records.
Use a Compliance Calendar
Track all recurring obligations in one calendar, including:
- State corporate reports
- Form 990 deadlines
- Charity-registration renewals
- Tax filings
- License renewals
- Board meetings
- Insurance renewals
- Grant-reporting deadlines
Assign responsibility for each task and keep copies of submitted filings, receipts and approvals.
Conclusion
Keeping a nonprofit in good standing requires ongoing attention to corporate, tax, fundraising and governance requirements. Maintain accurate records, keep government information current, meet filing deadlines, and review obligations across every applicable agency, not just the IRS.
