To start a nonprofit in Alabama, you file a Certificate of Formation with the Secretary of State, appoint at least one director (three is better), adopt bylaws, get an EIN from the IRS, and apply for 501(c)(3) tax-exempt status if that’s your goal. After that, the organization has to file annual reports with the state and an information return with the IRS every year to stay in good standing. The rules governing nonprofit corporations in Alabama live in Title 10A, Chapter 3A of the Alabama Code, which replaced the older 1984 statutes.
File the Certificate of Formation
The Certificate of Formation is the document that legally creates the corporation. Alabama Code Section 10A-3A-3.02 sets out what it must contain.1Alabama Legislature. Alabama Code Title 10A-3A-3.02 – Certificate of Formation
- A corporate name that includes a designator like “Corporation,” “Incorporated,” “Corp.,” or “Inc.,” and is distinguishable from every other entity already registered with the Secretary of State.
- A statement of purpose describing the nonprofit’s primary activities.
- Whether the corporation will have members. This shapes voting rights and control, so treat it as a structural decision.
- The name and street address of the registered agent in Alabama.
- The names and addresses of the initial directors and every incorporator.
The incorporator signs the document. You can submit it through the Secretary of State’s online portal or by mail, along with the filing fee on the published fee schedule.2Alabama Secretary of State. Fee Schedule Check the current schedule before filing; fees change. If you mail the filing, include a self-addressed stamped envelope for the return copy.
Once accepted, the Secretary of State issues a stamped Certificate of Formation or a certificate of existence. Keep it. You’ll need it to open a bank account, apply for the EIN, and file for federal tax exemption.
Include the IRS Language Before You File
If the nonprofit will seek 501(c)(3) status, the Certificate of Formation itself has to contain specific language, or the IRS will send you back to amend it. Three provisions are required:
- A purpose clause stating that the corporation is organized exclusively for charitable, religious, educational, or scientific purposes within the meaning of Section 501(c)(3).3Internal Revenue Service. Suggested Language for Corporations and Associations (per Publication 557)
- A prohibition on private benefit: no part of the net earnings may benefit any private individual, no substantial lobbying, and no participation in political campaigns for or against any candidate.
- A dissolution clause requiring that on dissolution, remaining assets go to another 501(c)(3) organization or to a government entity for a public purpose.4Internal Revenue Service. Does the Organizing Document Contain the Dissolution Provision Required Under Section 501(c)(3)
The IRS publishes suggested wording in Publication 557. Using that wording verbatim is the safest approach. Deviating from it can add months to the review of your exemption application.
Name a Registered Agent and Office
Alabama Code Section 10A-1-5.31 requires every nonprofit corporation to designate and continuously maintain a registered agent and a registered office in Alabama.5Alabama Legislature. Alabama Code 10A-1-5.31 – Designation and Maintenance of Registered Agent and Registered Office The agent accepts legal documents, including lawsuits, on the corporation’s behalf. The agent can be an Alabama resident individual or a business entity authorized to operate in the state. The office must be a street address where the agent can be personally served. A mailbox service or answering service doesn’t qualify.
This isn’t a one-time filing. If the agent resigns or moves, or the office address changes, you must update the record with the Secretary of State promptly. Letting the agent lapse is one of the most common paths to administrative dissolution, because the state has no way to deliver required notices and eventually treats the entity as defunct.
Set Up the Board, Officers, and Bylaws
Alabama’s statutory minimum is one director, but the IRS generally expects a functioning board of at least three unrelated individuals for 501(c)(3) applicants. Setting the minimum at three from the start avoids amending your governing documents later.
The corporation also needs officers to handle day-to-day administration, typically a president and a secretary at minimum. One person can hold more than one office, though separating the president and secretary roles improves documentation and reduces the appearance of concentrated control.
After the Certificate of Formation is accepted, the initial directors hold an organizational meeting to adopt bylaws and appoint officers. Bylaws are the corporation’s internal operating rules: how meetings are called, how directors are elected and removed, what constitutes a quorum, and how routine business gets done. Minutes from that first meeting become the first entry in the corporation’s official records.
Adopt a conflict of interest policy at the same meeting. Alabama doesn’t require one by statute, but Form 1023 asks whether you have one when you apply for tax-exempt status.6Internal Revenue Service. Form 1023: Purpose of Conflict of Interest Policy A workable policy requires disclosure of the conflict, recusal from any related vote, and a written record that the board evaluated the situation independently.
Get an EIN, but Wait Until You’re Incorporated
Every nonprofit needs an Employer Identification Number from the IRS, even without employees. You’ll use it for tax filings, bank accounts, and grant applications. Apply online, by fax, or by mail using Form SS-4.7Internal Revenue Service. Obtaining an Employer Identification Number for an Exempt Organization
Timing matters. Don’t apply for the EIN until the Certificate of Formation has been accepted and the corporation legally exists. The IRS treats the EIN application as the start of the three-year clock for filing annual returns. Apply too early, then stall on the exemption application, and you can trigger automatic revocation for three missed years before the organization has really started.
Apply for 501(c)(3) Status
State incorporation does not make a nonprofit tax-exempt. Federal exemption under Section 501(c)(3) requires a separate application to the IRS, and there are two forms.
Form 1023-EZ
Smaller organizations may qualify for the streamlined Form 1023-EZ. Projected annual gross receipts must not exceed $50,000 in any of the next three years, and total assets must not exceed $250,000 in fair market value. Several categories are excluded regardless of size, including churches, schools, hospitals, supporting organizations, and organizations that maintain donor-advised funds or deal in digital assets.8Internal Revenue Service. Instructions for Form 1023-EZ
Form 1023
Organizations that exceed the thresholds or fall into an excluded category file the full Form 1023. It’s substantially longer, requires detailed financial projections and narrative descriptions of activities, and takes considerably longer to process. Either way, the formation documents must already contain the IRS purpose, prohibition, and dissolution language, or the application stalls.
Keep Up With Annual Filings
Alabama Business Privilege Tax and Annual Report
Alabama requires every active corporation, nonprofits included, to file an annual report and pay the state’s Business Privilege Tax. For taxable years beginning after December 31, 2022, nonprofit corporations that would otherwise owe the $100 minimum privilege tax instead pay $50, plus a $10 Secretary of State annual report fee.9Alabama Department of Revenue. Business Privilege Tax Larger organizations with greater net worth pay more.
Missing the deadline can lead to administrative dissolution. During dissolution the nonprofit cannot legally operate, enter contracts, or assert its corporate protections, and reinstatement means additional fees and paperwork.
Federal Form 990
Tax-exempt nonprofits also file an annual information return with the IRS. The form depends on size:
- Form 990-N (e-Postcard) for organizations with gross receipts normally $50,000 or less.10Internal Revenue Service. Form 990 Series Which Forms Do Exempt Organizations File Filing Phase In
- Form 990-EZ for organizations with gross receipts under $200,000 and total assets under $500,000.
- Form 990 for organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more.
The return is due on the 15th day of the fifth month after the organization’s fiscal year ends. For a calendar-year nonprofit, that’s May 15.11Internal Revenue Service. Exempt Organization Filing Requirements: Form 990 Due Date Extensions are available.
Late filings draw a penalty of $20 per day, up to the lesser of $10,500 or 5 percent of gross receipts for the year. For organizations with gross receipts over roughly $1 million, the daily penalty rises to $105 per day, capped at $54,500. The worst outcome is automatic revocation: three consecutive years of not filing, and the IRS revokes tax-exempt status with no warning and no appeal at that point.12Internal Revenue Service. Annual Exempt Organization Return: Penalties for Failure to File
Employment Taxes if You Hire
Nonprofits with employees face most of the same federal payroll obligations as any other employer, with one exception. Organizations described in Section 501(c)(3) are exempt from Federal Unemployment Tax (FUTA).13Internal Revenue Service. Section 501(c)(3) Organizations – FUTA Exemption Wages remain subject to Social Security and Medicare taxes, and the FUTA exemption does not relieve the organization of Alabama’s state unemployment insurance obligations, which are handled separately.
Keep Clean Records
Alabama law requires every nonprofit corporation to maintain accurate and complete financial records and minutes of all proceedings, kept at the registered office or principal place of business. If the corporation has members, they have a statutory right to inspect the records for any purpose reasonably related to their interest in the organization.
In practice, that means organized files of board meeting minutes, financial statements, tax returns, the Certificate of Formation, the bylaws, and any amendments. Poor recordkeeping is one of the fastest ways to lose the protection of the corporate form. If a court finds that the corporation didn’t observe basic corporate formalities, individual directors and officers may lose the liability shield that incorporation was supposed to provide. Clean books are the price of the corporate veil.