To start a nonprofit organization in Illinois, you file articles of incorporation with the Secretary of State, get an EIN from the IRS, adopt bylaws, apply to the IRS for 501(c)(3) tax-exempt status, and register with the Illinois Attorney General before you ask anyone for a donation. Plan on at least $340 in government fees if you qualify for the streamlined IRS application, or roughly $665 if you have to file the full one. Getting the paperwork right the first time matters, because errors in your articles or bylaws can push your federal exemption back by months.
What You Need Before You File Anything
Pick a name that is distinguishable from every other corporation already on record in Illinois. The Secretary of State’s business entity search will tell you if it’s available. The name needs a corporate designator at the end: Corporation, Incorporated, Company, Limited, or an abbreviation such as Corp., Inc., or NFP.
Line up a registered agent. This is the person or company that accepts legal notices and official state mail for your nonprofit. The agent must be an Illinois resident whose business office is the registered office, or a business entity authorized to operate in Illinois with an office at that same street address.1Illinois General Assembly. Illinois Code 805 ILCS 105 – General Not For Profit Corporation Act of 1986 A P.O. Box will not do.
Recruit at least three initial directors. Illinois law requires that minimum, and these people take on fiduciary responsibility the moment the corporation exists. They don’t have to live in Illinois, but they do have to be real participants, not names.
Drafting the Articles of Incorporation
You file your articles on Form NFP 102.10 from the Secretary of State.2Illinois Attorney General. Checklist for Illinois Charitable Organizations The form asks for the standard items: name, registered agent, directors, purpose. Two clauses in particular deserve attention, because the IRS will reject your 501(c)(3) application if they aren’t there.
The Purpose Clause
Your articles must limit the organization’s purposes to one or more of the exempt categories under Section 501(c)(3): charitable, religious, educational, scientific, literary, and certain others.3Internal Revenue Service. Instructions for Form 1023 The IRS publishes sample language built around the phrase “organized exclusively for” those purposes.4Internal Revenue Service. Suggested Language for Corporations and Associations Per Publication 557 Tailor the specific categories to your mission, but keep the limiting language.
The Dissolution Clause
Your articles must permanently dedicate the organization’s assets to exempt purposes. In practice, that means a dissolution clause directing that any remaining assets, if the organization ever winds down, go to another 501(c)(3) or to a government entity for a public purpose. The IRS publishes sample language for this too.5Internal Revenue Service. Does the Organizing Document Contain the Dissolution Provision Required Under Section 501(c)(3) Including both clauses from the start spares you from amending the articles later, which costs more fees and delays your federal exemption.
Filing With the Secretary of State
Submit the completed Form NFP 102.10 online through the Secretary of State’s portal or by mail. The mail filing fee is $50. Online filing is $75 plus a payment processor fee. Expedited online processing is available for an extra $100, cutting turnaround from roughly two weeks to a few business days.
Once the state approves the filing, you get back a file-stamped copy of your articles. Keep it. You’ll need it to open a bank account, apply for federal tax-exempt status, and register with the Attorney General.
EIN, Bylaws, and a Conflict of Interest Policy
Every nonprofit needs an Employer Identification Number, even one that will never hire anyone. The EIN is the nine-digit number the IRS uses to identify your organization.6Internal Revenue Service. Employer Identification Number Applying online on the IRS website is free and gives you the number immediately.7Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
With the EIN in hand, your board should hold its first meeting and adopt bylaws. Bylaws are the internal rulebook: how meetings are called, how directors and officers are elected, what officer roles exist, how decisions get made. You don’t file bylaws with the state, but you’ll need them for your IRS application and your Attorney General registration. Most Illinois nonprofits name at least a president or board chair, a secretary, and a treasurer.
The IRS also expects you to adopt a conflict of interest policy. It sets a process for identifying when a board member’s personal financial interests collide with the organization’s mission, requires disclosure, and keeps the affected person out of the vote.8Internal Revenue Service. Form 1023 – Purpose of Conflict of Interest Policy The IRS treats this as a safeguard against private benefit, which can cost an organization its exempt status.
Applying for 501(c)(3) Status
Organizations formed after 1969 have to notify the IRS they are seeking recognition as a 501(c)(3). Without that notice, the IRS won’t treat the organization as tax-exempt.9Office of the Law Revision Counsel. 26 USC 508 – Special Rules With Respect to Section 501(c)(3) Organizations The only exceptions are churches and very small organizations whose gross receipts are normally $5,000 or less per year.
You file the notice as Form 1023, submitted electronically through Pay.gov.10Internal Revenue Service. About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code The user fee is $600. Smaller organizations may qualify for the streamlined Form 1023-EZ at $275 if they project annual gross receipts under $50,000 for the current year and the next two, and hold less than $250,000 in total assets.11Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee
Wait times differ sharply. About 80% of Form 1023-EZ determinations are issued within 22 days. For the full Form 1023, 80% are issued within 191 days.12Internal Revenue Service. Where’s My Application for Tax-Exempt Status? Plan fundraising around that. Donors can still make tax-deductible contributions while you wait, because an eventual approval typically relates back to your incorporation date or the date you applied.
Registering With the Attorney General
Before your nonprofit can lawfully ask Illinoisans for donations, you have to register with the Attorney General’s Charitable Trust Bureau.13Illinois General Assembly. Illinois Administrative Code Title 14 Part 400 – Solicitation for Charity Act The requirement reaches any charity soliciting in the state, with limited statutory exceptions. You submit Form CO-1, the Registration Statement, with a $15 fee payable to the Illinois Charity Bureau Fund.14Illinois Attorney General. Charity Registration
Attach these to the registration:
- Your adopted bylaws.
- Your file-stamped articles of incorporation from the Secretary of State.
- Your IRS determination letter, if you have it; if not, send it in when it arrives.
Organizations in operation less than a year, not yet required to file an annual report, also complete Form CO-2, a financial information form.15Office of the Illinois Attorney General. Form CO-1 – Charitable Organization Registration Statement Organizations that have been operating longer file an AG990-IL annual financial report within six months after the end of each fiscal year.
Illinois State Tax Exemptions
Federal exemption doesn’t automatically clear you of state tax. Two separate Illinois exemptions matter.
State Income Tax
Illinois generally recognizes your federal exemption for state income tax. But if your nonprofit earns unrelated business income, meaning revenue from a trade or business regularly carried on that isn’t substantially related to your exempt purpose, you must file Form IL-990-T with the Illinois Department of Revenue.16Illinois Department of Revenue. Exempt Organization Many new nonprofits never run into this, but anyone planning a commercial side venture should track it from day one.
Sales Tax Exemption
To avoid paying Illinois sales tax on purchases, apply separately through the Illinois Department of Revenue using the STAX-1 application. You can file online through MyTax Illinois without creating an account, or submit the paper form.17Illinois Department of Revenue. Application for Sales Tax Exemption Until the exemption letter arrives, you pay sales tax like any other buyer.
Keeping Your Nonprofit in Good Standing
Incorporation is the beginning, not the finish line. Illinois nonprofits owe annual filings to the IRS, the Secretary of State, and the Attorney General, and missing them has real consequences.
Federal Form 990
Every 501(c)(3) files an annual information return. Which version depends on size:
- Form 990-N, the e-Postcard, for organizations with gross receipts normally $50,000 or less.18Internal Revenue Service. Annual Electronic Filing Requirement for Small Exempt Organizations – Form 990-N (e-Postcard)
- Form 990-EZ for organizations with gross receipts under $200,000 and total assets under $500,000.
- Form 990 for organizations above those thresholds.
Miss three consecutive years and the IRS automatically revokes your tax-exempt status by operation of law. There is no warning letter and no grace period. Once revoked, your organization cannot receive tax-deductible contributions and may owe corporate income tax on all revenue going forward. Reinstatement means filing a new exemption application and paying the user fee again.
Illinois Annual Report
Illinois nonprofit corporations file an annual report with the Secretary of State to stay in good standing, and domestic corporations can file it online.19Illinois Secretary of State. Information for Filing an NFP Annual Report Online Fall behind and the state can administratively dissolve the corporation, costing you your legal standing in Illinois.
Charitable Solicitation Renewal
Your Attorney General registration is not a one-and-done. File the AG990-IL annual report within six months after the close of each fiscal year.15Office of the Illinois Attorney General. Form CO-1 – Charitable Organization Registration Statement A lapsed registration can lead the Attorney General to bar your organization from soliciting donations in Illinois.
If You Hire Employees
Section 501(c)(3) organizations are exempt from federal unemployment tax (FUTA), which saves roughly 6% on the first $7,000 of each employee’s wages compared to a for-profit employer.20Internal Revenue Service. Section 501(c)(3) Organizations – FUTA Exemption You are still responsible for withholding and paying FICA (Social Security and Medicare) on employee wages of $100 or more per year. Illinois nonprofits with employees also need to register with the Illinois Department of Revenue for state withholding.