Articles of incorporation for a charity

This guide is for founders who are about to incorporate a charity, or who already have and want to check their articles will pass the IRS's review. After reading, you'll know what articles of incorporation are, the two clauses the IRS looks for and what they mean in plain words, what your state will ask for, and how to change the articles later.

For the full order of steps, from choosing a name to applying to the IRS, see the Forming your charity step of the founder pathway.

Articles or bylaws: what's the difference?

Your articles of incorporation are the short document you file with your state to create the nonprofit corporation. Some states use other names. New York calls it a certificate of incorporation and Texas calls it a certificate of formation. It's a public record, and changing it means filing an amendment with the state.

Your bylaws are your internal rulebook: how many directors you have, how meetings and votes work, what officers do. You adopt them yourselves, usually at the first board meeting. Your state's nonprofit law may say whether they must be filed or kept on record. Start from our bylaws template.

The difference matters for tax exemption. Publication 557, the IRS's main guide to exempt status, says the limits on your purposes must be in the articles. Putting them only in your bylaws doesn't count. Neither does a promise from your officers, or the fact that your work is in fact charitable.

The organizational test

To qualify under section 501(c)(3), the part of the tax code that covers charities, your organization must pass the IRS's organizational test. In plain words, your founding document must do three things:

1. Limit what the organization is for to charitable purposes (the purpose clause).
2. Lock the organization's assets to charitable use forever, even if it closes (the dissolution clause).
3. Not give the organization power to do more than an insubstantial amount of work that doesn't serve those purposes.

If you apply on the full Form 1023, you upload a copy of your articles, including any amendments, and the IRS reads them. If you're eligible for the shorter Form 1023-EZ, Publication 557 says you don't send them, but the IRS can ask for them at any time in a compliance check or examination. Either way, write them right the first time.

The purpose clause

The Form 1023 instructions say your organizing document must limit your purposes to those described in section 501(c)(3). They list those purposes as charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

The instructions give this as an acceptable purpose clause:

"The organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding sections of any future federal tax code."

The sample articles in Publication 557 (Draft A, Article Third) use a slightly longer version that also lets the charity give grants to other charities:

"Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code."

What it means: the corporation exists only for the kinds of purposes the tax code allows, and it can't take up other kinds of work. The words "or corresponding sections of any future federal tax code" keep the clause working if Congress renumbers the law.

You can describe your own mission too, such as running a food pantry or teaching adults to read. The instructions say you can limit your purposes by naming a specific charitable purpose, like "relief of the elderly within the meaning of section 501(c)(3)." But they also warn that purposes broader than section 501(c)(3) may cause you to fail the test, even if you mention section 501(c)(3) elsewhere. In that case, the instructions say, you'll need to amend your organizing document before applying.

The "no private benefit" and politics paragraph

Publication 557's sample (Article Fifth) adds a paragraph that many charities copy. It says no part of the charity's net earnings may benefit members, trustees, officers or other private persons, except reasonable pay for services. It also says no substantial part of the charity's activities may be lobbying, and that the charity won't take part in any political campaign for or against a candidate. These are the core rules every 501(c)(3) lives by, so having them in your articles helps everyone remember them.

The dissolution clause

The Form 1023 instructions say your organizing document must permanently dedicate your assets to a section 501(c)(3) purpose. If you close, what's left must go to an exempt purpose, or to the federal, a state or a local government for a public purpose.

The instructions give this as an acceptable dissolution clause:

"Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose."

Publication 557's sample articles (Article Sixth) add one more sentence. It says any assets not given away this way will be distributed by a court in the county of the charity's main office to organizations that are organized and operated exclusively for those purposes.

What it means: money and property given to a charity stay charitable. If the charity ever closes, the founders, directors and members can't take what's left. Publication 557 says if assets could go to members or private individuals, the organizational test isn't met.

A few practical points from the IRS:

• Naming a specific charity to receive your assets is allowed only if the clause requires that charity to be exempt under section 501(c)(3) when you dissolve, and names a fallback in case it isn't.
• Some states' laws already dedicate a charity's assets. The IRS says that in certain states you can rely on state law instead of a clause. Publication 557 adds that including the clause anyway may make review of your application easier.
• If your articles say assets could go to members or individuals, the Form 1023 instructions say you must amend them to remove that.

What your state asks for

Each state has its own form and rules. Look on your secretary of state's website for "nonprofit corporation" or "not-for-profit corporation." Here's what two states say.

Texas

Texas uses Form 202, the Certificate of Formation for a nonprofit corporation. Its instructions say:

• Filing fee: $25.
• Name: must be distinguishable from other entities on file. A preliminary name check isn't final.
• Registered agent: a Texas resident or an entity allowed to do business in Texas, at a street address where legal papers can be delivered during business hours. The corporation can't be its own agent, and a mailbox service alone won't do. The agent must have agreed to serve.
• Directors: if a board manages the corporation, three directors are required, and they must be people, not companies.
• Members: if the corporation will have no members, the certificate must say so.
• Purpose: any lawful purpose, but the form leaves out IRS language, as above.
• Organizer: at least one organizer, a person aged 18 or older or an entity, signs the form.
• Filing: online, by mail or in person.

New York

New York's Department of State says the filing fee for a not-for-profit certificate of incorporation is $75. The name must generally include a word such as "Incorporated," "Corporation" or "Inc." unless an exemption applies. You choose whether to form a charitable or non-charitable corporation, and some purposes need written consent from another state agency before you file.

Common mistakes

• Leaving out the clauses. Using a state form that has no purpose or dissolution clause, and not adding them.
• Purposes that are too broad. Phrases like "any lawful purpose" go beyond section 501(c)(3). The IRS says broad purposes may fail the test and need an amendment before you apply.
• Limits only in the bylaws. The IRS says that isn't enough.
• Assets that could go to people. Any wording that lets members or directors share what's left must come out.
• Sending an unfiled copy. The Form 1023 instructions say your articles must show they were filed with and approved by the state on a specific date. If you don't have that copy, they explain how to send a substitute copy with a signed declaration.

Fixing articles costs time. Publication 557 says that if the IRS requires a substantive amendment to your organizing document, your exemption takes effect from the date of the change, not from the date you were formed. A nonsubstantive fix, such as adding a missing dissolution clause, ordinarily doesn't change your start date.

Changing your articles later

To change your articles, your board (and your members, if you have voting members) approves the change as your bylaws and state law require. Then you file an amendment with the state, often called a certificate or articles of amendment. Texas, for example, uses a certificate of amendment, including for a change of name.

Tell the IRS too. Publication 557 says to report amendments to your articles or bylaws as the Form 990 or 990-EZ instructions explain. The Form 990 instructions list examples of significant changes to report, including changes to your exempt purposes or mission and your name. A change of registered agent doesn't count as significant. Keep the old purpose and dissolution clauses, or equally strong ones, in any new version.

Articles checklist

• Get your state's nonprofit formation form and instructions
• Choose a name that meets your state's rules
• Find a registered agent with a street address in your state
• List the initial directors your state requires
• Add a purpose clause limited to section 501(c)(3) purposes
• Add a dissolution clause dedicating assets to 501(c)(3) purposes
• Check that nothing lets assets go to members or individuals
• File, pay the fee, and keep the stamped copy with your records
• Adopt bylaws at your first board meeting

If you'd like a lawyer or experienced founder to look over your draft, ask a member charity for help through the Exchange.