To start a nonprofit in Vermont, you incorporate under Title 11B of the Vermont Statutes with the Secretary of State, obtain an Employer Identification Number from the IRS, apply for federal 501(c)(3) tax-exempt status, and then register with the Vermont Department of Taxes and Department of Labor for any accounts your activities require. The state filing fee is $155, the IRS user fee is either $275 or $600 depending on which application you qualify for, and the full sequence from state filing through IRS determination can run several months.
Decide What Type of Nonprofit You Are Forming
Vermont’s Nonprofit Corporation Act splits organizations into two categories, and the choice shapes your governance rules and what happens to your assets if you ever dissolve. Public benefit corporations are the charitable, educational, and religious groups most people picture when they hear “nonprofit.” Mutual benefit corporations cover trade associations, social clubs, and similar member-serving groups. Pick the right category before you draft anything, because it belongs in the articles of incorporation and is awkward to change later.
If your plan is to seek 501(c)(3) status from the IRS, you are forming a public benefit corporation. That is the path most founders take, and the rest of this guide assumes it.
File Articles of Incorporation With the Secretary of State
The articles of incorporation are your foundational legal document. Vermont filings go through the Secretary of State’s Online Services portal, the fee is $155, and online submissions are typically processed within a few business days.1Vermont Secretary of State. Fees and Statutes Once approved, you receive a Certificate of Incorporation and a stamped copy of the articles. Keep both; banks and grant-makers will ask for them.
Pick a Compliant Name
Your name has to be distinguishable from every other entity already on file with the Secretary of State and must include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or “Limited” (or an abbreviation like “Corp.” or “Inc.”). It cannot use the word “cooperative” or suggest a purpose different from what your articles describe.2Vermont General Assembly. Vermont Statutes Title 11B Section 4.01 – Corporate Name Search the Secretary of State’s business database before you commit. If the name you want is close to an existing one, you can still use it with the other entity’s written consent.
Line Up a Registered Agent and Directors
Every Vermont nonprofit must continuously maintain a registered agent with a physical Vermont office; a post office box will not do. The agent can be an in-state individual or a business authorized to operate here. You also need an initial board of at least three directors, identified in or before the filing by full legal name and mailing address.
Include the IRS Language in the Original Filing
If you plan to apply for 501(c)(3) status, two provisions have to appear in the articles before you file them. One is a purpose clause limiting the organization’s activities exclusively to purposes recognized under Section 501(c)(3) of the Internal Revenue Code. The other is a dissolution clause stating that any remaining assets will go to another 501(c)(3) organization or to a federal, state, or local government for a public purpose.3Internal Revenue Service. Charity – Required Provisions for Organizing Documents Leave either one out and the IRS will reject your exemption application, forcing you to amend with the state and start over. Including both in the first draft is far cheaper.
Hold the Organizational Meeting and Adopt Bylaws
Once the state approves your filing, the initial directors (or the incorporators, if the articles do not name directors) hold an organizational meeting to adopt bylaws, appoint officers, and handle startup business.4Vermont General Assembly. Vermont Statutes Title 11B Section 2.05 – Organization of Corporation Take written minutes. They become part of the corporate record and show the IRS you are governing the organization properly.
Bylaws are the internal rulebook: board meeting procedures, officer duties, membership rights if any, committees, fiscal year, and amendment procedures. You do not file them with the state, but the IRS will want to see them during the 501(c)(3) review.
Vermont law requires a president, a secretary, and a treasurer unless your articles or bylaws say otherwise. One person cannot hold both the president and secretary roles at the same time, though other combinations are allowed.5Vermont General Assembly. Vermont Statutes Title 11B Section 8.40 – Required Officers
Get an Employer Identification Number
Next, apply to the IRS for an Employer Identification Number. This nine-digit number functions like a Social Security number for the organization and is required before you can open a bank account, hire employees, or apply for tax-exempt status. The IRS recommends forming your entity with the state first, because applying out of order can cause delays.6Internal Revenue Service. Get an Employer Identification Number The online application at IRS.gov is free and issues the EIN immediately. Mail and fax using Form SS-4 also work; they just take longer.
Apply for 501(c)(3) Tax-Exempt Status
With an EIN in hand, you file for federal exemption. The IRS offers two paths. Organizations expecting annual gross receipts under $50,000 and total assets below $250,000 can use the streamlined Form 1023-EZ. Everyone else files the full Form 1023, which calls for detailed financial projections and narrative descriptions of planned activities.7Internal Revenue Service. Instructions for Form 1023-EZ
Both are filed electronically through Pay.gov. As of 2025, the user fee is $275 for the 1023-EZ and $600 for the full Form 1023. Check the IRS exempt organization user fee page before filing because amounts change. The 1023-EZ is often reviewed within a few weeks; the full Form 1023 can take several months or longer.
Your application should include a conflict-of-interest policy requiring board members to disclose any personal financial interest in transactions involving the nonprofit. The IRS asks about this policy directly on both forms, and the absence of one slows review.
What You Give Up by Taking 501(c)(3)
Two political-activity limits come with the status. First, you cannot participate in any political campaign for or against a candidate for public office. There is no safe harbor; any amount of campaign intervention can cost the exemption. Second, lobbying cannot be a “substantial part” of your activities.8Congress.gov. Tax-Exempt Organizations Under Internal Revenue Code Section 501(c) – Political Activity Restrictions The default “substantial part” test is a vague facts-and-circumstances review with no bright line, so many nonprofits elect the expenditure test under IRC ยง 501(h), which sets concrete dollar limits. Under that test, a nonprofit with up to $500,000 in total expenditures may spend up to 20% on lobbying; the allowable percentage falls for larger budgets, with a $1 million annual cap. Exceeding 150% of these limits over a four-year average means losing exemption entirely.
Register With Vermont Tax and Labor Agencies
Federal exemption does not register you with the state. If your nonprofit will collect sales tax, meals and rooms tax, or needs a state business tax account for any reason, you must register with the Vermont Department of Taxes through its online portal or using Form BR-400 before making purchases or sales.9Department of Taxes. Nonprofit Organizations – Getting Started
Claim the Sales Tax Exemption
Holding 501(c)(3) status qualifies your nonprofit for a Vermont sales and use tax exemption on purchases related to your exempt purpose. To claim it, give the seller a completed, signed, and dated Form S-3 (Sales Tax Exemption Certificate) at or before the time of purchase. If you do not have the certificate at the time of sale, the seller has 90 days to obtain one from you.10Department of Taxes. Form S-3 Instructions Civic clubs, social organizations, recreational groups, and business leagues holding other types of 501(c) status do not qualify. The exemption is limited to 501(c)(3) organizations and certain 501(c)(5) agricultural organizations presenting agricultural fairs or festivals.
Register for Unemployment Insurance If You Pay Wages
Since July 2024, every Vermont nonprofit that pays any amount of wages must register with the Vermont Department of Labor for unemployment insurance, regardless of size. That means quarterly wage and contribution reports, any associated contributions, and reporting new hires within 10 days of their start date.11State of Vermont Department of Labor. Unemployment Insurance for Nonprofit Organizations A single part-time employee triggers compliance. Nonprofits can either pay unemployment contributions like any other employer or reimburse the state dollar-for-dollar for claims former employees file. Reimbursement avoids quarterly contributions but shifts the risk if a layoff happens.
Know the Rules Before You Fundraise
Vermont regulates fundraising through its Charitable Solicitations Law, and the rules are strictest when a nonprofit hires paid fundraisers. A paid fundraiser must register with the Vermont Attorney General’s Office, post a $20,000 bond, pay a $675 annual registration fee, and file a separate $270 notice of solicitation at least 10 days before each campaign.12Vermont General Assembly. Vermont Statutes Title 9 Section 2473 – Notice of Solicitation Even if you handle fundraising internally with volunteers, Vermont law prohibits misrepresenting the purpose of a solicitation or your relationship with any other entity, and the Attorney General’s office publishes guidance on required disclosures.13Office of the Vermont Attorney General. Charities and Paid Fundraisers
Keep the Status You Just Earned
Two filings keep the organization alive after launch, and missing either one has real consequences.
At the state level, Vermont nonprofits file a biennial report with the Secretary of State every two years, starting the year after initial registration. The filing window runs January 1 through April 1. The fee is $35 if any officer, director, or employee was compensated in the prior calendar year, and nothing if no one was.1Vermont Secretary of State. Fees and Statutes Miss the deadline and the state can administratively dissolve the corporation, which strips its legal standing. Reinstatement is possible but costs $70 in combined fees and requires catching up on everything missed.
At the federal level, most tax-exempt organizations file an annual return in the Form 990 series. Which version depends on financial activity: Form 990-N (the e-Postcard) for gross receipts of $50,000 or less; Form 990-EZ for gross receipts under $200,000 and total assets under $500,000; Form 990 for gross receipts of $200,000 or more or total assets of $500,000 or more; and Form 990-PF for private foundations regardless of size.14Internal Revenue Service. Form 990 Series – Which Forms Do Exempt Organizations File Failing to file for three consecutive years triggers automatic revocation of 501(c)(3) status with no warning from the IRS. Getting it back means filing a new exemption application and paying the full user fee again. It is one of the most common and most preventable ways small nonprofits lose their status.