Q: I would like to form a nonprofit entity in New Hampshire, what steps should I take?
A: In New Hampshire, a nonprofit, called a “voluntary corporation”, is formed pursuant to New Hampshire RSA 292.There are a series of steps at the state and federal level that should be taken when forming a New Hampshire nonprofit and obtaining federal tax-exempt status, including several requirements that are specific to the Granite State.
Forming a Voluntary Corporation in New Hampshire
Five or more people can form a New Hampshire nonprofit by filing Articles of Agreement with the Office of the New Hampshire Secretary of State. The purpose of the nonprofit must align with permitted charitable purposes, including any tax-exempt purpose allowable under Section 501 of the Internal Revenue Code. The Articles of Agreement must include the name of entity, charitable purpose, provisions for the disposition of corporate assets in the event of dissolution, principal address and email address, and the names and addresses of the five or more people associating together to form the nonprofit.
Notably, New Hampshire law requires that the Board of Directors of a New Hampshire nonprofit consists of at least five voting members who are not of the same immediate family or related by blood or marriage. This is a unique requirement under the New Hampshire statute and more burdensome than other states.
Additional documents that should be executed and adopted include a Board vote approving the nonprofit’s formation, adoption of the Bylaws, election of members of the Board of Directors, appointment of officers, and adoption of policies, the Bylaws, which are the rules and provisions by which the nonprofit will be governed and managed, and IRS Form SS-4, which is filed with the IRS to apply for and obtain an Employer Identification Number.
Conflict-of-Interest Considerations
New Hampshire law provides specific rules that apply to conflicts of interest transactions, called “pecuniary benefit transactions”. Pecuniary benefit transactions are transactions involving the nonprofit in which a director or officer has a direct or indirect financial interest. It is best practice for a New Hampshire nonprofit to adopt a conflict-of-law policy to identify any conflicts that may arise, establish processes for addressing such conflicts, and ensure any dealings with members of the nonprofit’s Board of Directors and officers are transparent and compliant with applicable laws and regulations. It is also advisable for a nonprofit to adopt a yearly questionnaire for Board members and officers to disclose potential conflicts of interest.
Federal Tax-Exempt Status and Oversight by the Charitable Trust Unit
In addition to forming the New Hampshire nonprofit, the incorporator or initial Board of Directors must take several additional steps. The nonprofit should apply for and obtain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. Obtaining federal tax-exempt status exempts the nonprofit from federal income taxation and allows donors to make tax-deductible donations to the nonprofit.
New Hampshire nonprofits must register with the Charitable Trust Unit of the New Hampshire Attorney General’s Office by filing Form NHCT-11, the Application for Registration. Nonprofits also have ongoing filing obligations, including an annual report on Form NHCT-12 with the Charitable Trust Unit of the New Hampshire Attorney General’s Office, an annual report with the New Hampshire Secretary of State, filed every five years in years ending in ‘0’ or ‘5’, and an annual federal exempt organization tax return with the IRS.
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