Form an Arizona Nonprofit Corporation

Starting a nonprofit corporation in Arizona looks easy. Fill out a form, mail it to the Arizona Corporation Commission, pay a filing fee and you are done. Right? Wrong. Filing the articles of incorporation is only the first of more than two dozen tasks that should be completed to create a nonprofit that is legally sound, ready to open a bank account and positioned to win 501(c)(3) tax-exempt status from the IRS.

Arizona nonprofit corporation attorneys Richard Keyt and his son, attorney and former CPA Richard C. Keyt, have formed 10,000+ Arizona companies, including 550+ Arizona nonprofit corporations that became 501(c)(3) charitable organizations. Richard Keyt has a master's degree in federal income tax law (LL.M.) from New York University School of Law and has practiced law in Arizona since 1979. Richard C. Keyt has a master's degree in accounting from the University of Notre Dame. Our clients have given us 433 five-star Google, Facebook & Birdeye reviews.

The Five Things Arizona Law Requires You to Do

Arizona's nonprofit corporation statutes require every new nonprofit corporation to do all of the following:

1. File articles of incorporation with the Arizona Corporation Commission (the “ACC”).
2. Publish the articles of incorporation in a newspaper of general circulation for three consecutive publications if the corporation's known place of business is not in Maricopa County or Pima County.
3. Prepare bylaws. A.R.S. § 10-3206 requires every Arizona nonprofit corporation to have bylaws.
4. Hold the first (organizational) meeting of the board of directors at which the board adopts the bylaws and appoints officers. A.R.S. § 10-3205 requires it.
5. Document the organizational meeting with minutes or an action by unanimous consent signed by all of the directors.

That sounds like a short list. It is not the whole job. Those five statutory steps are the minimum. A nonprofit that wants to become a tax-exempt charity, attract donors, open a bank account and stay out of trouble with the IRS needs much more, which is why we provide 28 services and prepare up to 16 documents when we form a nonprofit.

The Arizona Corporation Commission's Own Warning

The ACC publishes a free fill-in-the-blank form for nonprofit articles of incorporation. Many do-it-yourselfers use it. If your nonprofit intends to become a 501(c)(3) charity, that is a mistake.

Nonprofit Does Not Mean Tax-Exempt

One of the most common misconceptions we hear is that a corporation formed under Arizona's nonprofit corporation laws is automatically exempt from federal income tax and that donations to it are automatically tax-deductible. Neither is true.

“Nonprofit” is a state law concept. It simply means the corporation is not organized to make profits for owners. “Tax-exempt” is a federal tax concept governed by the Internal Revenue Code. Unless your nonprofit applies for and receives IRS recognition of its exemption under Internal Revenue Code § 501(c)(3), it must file federal and state income tax returns, pay tax on its income, and its donors cannot deduct their contributions.

To qualify under Section 501(c)(3), an organization must be organized and operated exclusively for one or more exempt purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals. None of its earnings may benefit any private individual, lobbying cannot be a substantial part of its activities, and it may not participate in any political campaign for or against a candidate.

Because the articles of incorporation for a taxpaying nonprofit and a tax-exempt charity are different, you must decide which kind of nonprofit you are forming before the articles are filed.

IRS Form 1023 v. IRS Form 1023-EZ

The IRS gives charities two ways to apply for recognition of 501(c)(3) status. Both are filed electronically.

• Form 1023-EZ is a short streamlined online application with a $275 IRS user fee. Only smaller organizations that pass the IRS eligibility worksheet may use it.
• Form 1023 is the full application, with a $600 IRS user fee. It is long and detailed. A new organization must describe its past, present and planned activities in detail and provide financial information, including budgets with a breakdown of projected revenue and expenses.

Timing matters. Generally, if the corporation files its application within fifteen months after the end of the month in which it was formed and the IRS approves it, the exemption is retroactive to the date the corporation was formed. Miss that window and the corporation generally will not be exempt for the period before it applied, and donations made during that period may not be deductible.

When your nonprofit must file the full Form 1023, we prepare it for a flat fee of $3,500 (plus the IRS user fee), with input from your board of directors and president. Getting the application right the first time avoids the delays and follow-up questions that bog down incomplete applications.

Churches, integrated auxiliaries of churches and conventions or associations of churches, and organizations that are not private foundations and normally have gross receipts of not more than $5,000 a year are not required to file Form 1023 to be tax-exempt. Many still file to receive an IRS determination letter, which gives donors advance assurance that their gifts are deductible and helps with state tax exemptions and nonprofit mailing privileges.

The 10 Steps to Form an Arizona Nonprofit Corporation

Here is a summary of the major steps. Every one of them is a place where a do-it-yourselfer can make a costly mistake, and every one of them is handled for you when you hire us.

1. Choose a Name That Is Available and Will Not InfringeClick to Open ▾

The name must be distinguishable from other entities registered with the ACC and must satisfy A.R.S. § 10-3401. It may not state or imply that the corporation is organized for a purpose other than one permitted by A.R.S. § 10-3301 and its articles. You can check availability with the ACC's entity name search, but an available name can still infringe a federally registered trademark, so it is wise to search the U.S. Patent & Trademark Office database too.

2. Prepare the Articles of IncorporationClick to Open ▾

The articles must state the corporation's name, a brief statement of the character of affairs it initially intends to conduct, the name and address of each initial director, the name, street address and signature of the statutory agent, the known place of business, the name and address of each incorporator, whether the corporation will have members, and the signatures of all incorporators. A charity's articles also need the IRS purpose and dissolution provisions discussed above.

3. Decide Whether the Corporation Will Have MembersClick to Open ▾

An Arizona nonprofit corporation is not required to have members. A nonprofit without members is governed entirely by its board of directors. A nonprofit with members must hold annual membership meetings (unless the articles provide otherwise), give voting members notice of meetings at least ten but not more than sixty days in advance, and maintain a membership list. This is a decision that should be made deliberately, because it shapes how the organization is governed for its entire life.

4. Appoint a Statutory AgentClick to Open ▾

Every Arizona nonprofit must have a statutory agent in Arizona who can accept service of lawsuits and legal notices for the corporation. When we form your nonprofit, KEYTLaw, LLC serves as its statutory agent for the first year at no charge, then for $99 a year if you choose to keep us. You may change statutory agents at any time. If your nonprofit wants to keep a home address off the ACC's public website, we also offer an address service for $100 a year.

5. Prepare Certificates of DisclosureClick to Open ▾

All incorporators and every person who is an officer, director or trustee when the articles are filed must sign a certificate of disclosure under A.R.S. § 10-3202. Signatures must be dated within 30 days of delivery to the ACC. If a new officer or director is added within sixty days after filing, an additional sworn declaration must be filed, or the ACC may administratively dissolve the corporation.

6. File With the ACC and Pay for Expedited ReviewClick to Open ▾

The articles, a cover sheet and the certificates of disclosure are filed with the ACC along with the filing fee. We always pay for expedited review. Without it, approval can take weeks, which eats into the time available to publish the articles and can leave you waiting a month only to learn your articles were rejected. A rejected filing fee is not refunded.

7. Publish the Articles (Maybe)Click to Open ▾

If the corporation's known place of business is not in Maricopa County or Pima County, the entire articles must be published three consecutive times in a newspaper of general circulation in that county within sixty days after filing. Publication can cost $200 to $600, and failing to publish on time can cost the corporation its existence. Our nonprofits use a Maricopa County address, either their own or ours at no charge as the initial place of business, so they avoid out-of-county publication costs entirely.

8. Adopt Nonprofit BylawsClick to Open ▾

A.R.S. § 10-3206 requires bylaws. Do not use bylaws written for a for-profit corporation or for a nonprofit in another state. We draft bylaws specifically for Arizona nonprofit corporations.

9. Hold and Document the Organizational MeetingClick to Open ▾

Under A.R.S. § 10-3205, the initial board must complete the organization of the corporation by appointing officers, adopting bylaws and conducting other business. We prepare organizational resolutions the directors sign, which also authorize the corporation to reimburse the founders for the legal fees and costs of forming it.

10. Obtain an EIN and Arizona Tax RegistrationsClick to Open ▾

A nonprofit that intends to apply for tax-exempt status, open a bank account or pay employees needs a federal employer identification number. Do not apply for the EIN until after the corporation is formed. We obtain the EIN for you. If the corporation will engage in activities subject to Arizona transaction privilege tax or will pay wages, it must also register with the Arizona Department of Revenue.

11. Keep Up With Ongoing ComplianceClick to Open ▾

Every Arizona nonprofit corporation must file an annual report with the ACC and pay a $10 fee. The report lists its directors and principal officers, describes its activities, states whether it has members, includes a certificate of disclosure and a statement of financial condition, and confirms that required Arizona income tax returns have been filed. Tax-exempt organizations also file an annual information return with the IRS in the Form 990 series, which is open to public inspection.

The Seven Policies Most DIY Nonprofits Never Adopt

The IRS Form 990 that tax-exempt organizations file every year asks, in black and white, whether the organization has a written conflict of interest policy, a written whistleblower policy, a written document retention and destruction policy, and a written policy for evaluating joint ventures with taxable entities. Many knowledgeable people believe an exempt organization that answers “no” invites more IRS scrutiny.

When we form a nonprofit corporation, we prepare all four of those IRS-recommended policies plus three more we recommend: a gift acceptance policy, a travel and expense reimbursement policy, and a compensation policy. One of the seven, the conflict of interest policy, relates to the director conflict-of-interest rules in A.R.S. § 10-3864.

These seven policies illustrate one of the biggest reasons we do not recommend do-it-yourself nonprofits. Most people forming their own nonprofit do not know these policies exist. Those who do rarely know whether a policy downloaded from the internet is legally sufficient under Arizona and federal law.

Why Do-It-Yourself Nonprofit Corporations Are Risky

Forming a nonprofit corporation is not like forming a single-owner LLC. If you make a mistake forming your own LLC, your LLC is not going to sue you. A nonprofit is different.

The founders, initial directors and officers of a nonprofit corporation owe fiduciary duties to the corporation. If the corporation is not formed properly, or if their acts or omissions cause it to violate Arizona's nonprofit laws, they can be liable to the corporation for the harm it suffers. That is a substantially greater risk than most founders realize.

What You Get When You Hire Us

For a flat fee of $1,297 we provide 28 services and prepare up to 16 documents. Sixteen custom attorney-prepared documents for $1,297 works out to about $81 per document. Highlights include:

• Unlimited answers to your questions from two experienced Arizona nonprofit attorneys, one with a master's degree in tax law and one who is a former CPA.
• Name availability check with the Arizona Corporation Commission.
• Custom articles of incorporation drafted with the IRS-required 501(c)(3) language, signed digitally via DocuSign.
• Certificates of disclosure and the ACC cover sheet.
• Expedited filing with the ACC, with the $75 expedited filing fee included.
• A Maricopa County place of business so your nonprofit avoids out-of-county newspaper publication costs.
• First-year statutory agent service at no charge.
• Custom Arizona nonprofit corporation bylaws.
• Organizational resolutions of the board of directors, including authority to reimburse the founders for formation costs.
• All seven policies: conflict of interest, whistleblower, document retention and destruction, joint venture, gift acceptance, travel and expense reimbursement, and compensation.
• The federal employer identification number (EIN).
• A corporate minute book and seal.
• Formation within 24 hours after we have your information, payment and the president's DocuSign signature.

If your nonprofit needs the full IRS Form 1023, we can prepare that too for a flat fee of $3,500 plus the IRS user fee.

Frequently Asked Questions

How much does it cost to have KEYTLaw form an Arizona nonprofit corporation?Click to Open ▾

Our flat fee is $1,297. It includes 28 services, up to 16 documents, the $75 Arizona Corporation Commission expedited filing fee, a corporate minute book and seal, and postage.

How fast can you form my nonprofit corporation?Click to Open ▾

We form new Arizona nonprofit corporations within 24 hours after we receive all of your information, receive payment, and your president digitally signs the DocuSign version of the Articles of Incorporation that we email to the president.

Is my Arizona nonprofit corporation automatically tax-exempt?Click to Open ▾

No. Nonprofit status is a state law concept. To be exempt from federal income tax as a charity, and for donors to deduct their gifts, the corporation generally must apply to the IRS on Form 1023 or Form 1023-EZ and receive a favorable determination.

Can I use the Arizona Corporation Commission's form articles of incorporation for a charity?Click to Open ▾

The ACC's own instructions warn that its form meets only the minimum requirements of Arizona law and contains none of the language the IRS requires before it will grant tax-exempt status. If you intend to become a 501(c)(3) charity, you should not use it.

Does an Arizona nonprofit corporation have to have members?Click to Open ▾

No. An Arizona nonprofit corporation may choose to have members or not. A nonprofit without members is governed by its board of directors. The articles of incorporation must state which choice the corporation has made.

Do I have to publish my nonprofit's articles of incorporation in a newspaper?Click to Open ▾

Only if the corporation's known place of business is outside Maricopa County and Pima County. Nonprofits we form use a Maricopa County address, so they avoid out-of-county publication costs.

Will you prepare the IRS Form 1023 application for 501(c)(3) status?Click to Open ▾

Yes. Our flat fee to prepare IRS Form 1023 is $3,500, plus the IRS user fee. We prepare it with input from your board of directors and president.

Can the founders be reimbursed for the cost of forming the nonprofit?Click to Open ▾

Yes. The organizational resolutions we prepare authorize the corporation to reimburse the founders for the legal fees and costs of forming it.

How to Hire Us to Form Your Arizona Nonprofit Corporation

Arizona nonprofit corporation attorneys Richard Keyt and his son, attorney and former CPA Richard C. Keyt, have formed 10,000+ Arizona companies, including 550+ Arizona nonprofit corporations that became 501(c)(3) charitable organizations. Let us do it right the first time for your nonprofit.

To hire us to form your Arizona nonprofit corporation for $1,297, choose one of these options:

• Online, 24/7: complete our Nonprofit Corporation Formation Questionnaire.
• By phone: call Richard Keyt at 480-664-7478 or Richard C. Keyt at 480-664-7472 and give us your information over the phone.
• Meet with us: book a free office, phone or Zoom video consultation.
• By email: send your questions to rk@keytlaw.com.

Have questions first? Call us. We are happy to give you free answers to your questions about forming an Arizona nonprofit corporation.