(Also see important note about IRS rules impacting your newly-incorporated group at the bottom)
In order to attain non-profit status, you will need to apply to your Secretary of State’s office to incorporate (in some states, you’ll apply to a separate economic development or other entity). A simple internet search for “incorporate non-profit [State name]” should guide you, but please let us know if you need help. Incorporating will lock in your organization’s name and register your group with the state. It also will provide your organization with limited liability (for more on this, please see Does My IBA Need D&O Insurance?).
Each state’s Secretary of State’s Office has a website, and most provide information, forms and incentive to submit forms online. You do not need to reserve a name, one form option possibly offered by your Secretary of State – this is an unnecessary step and a waste of precious start-up funds. The act of incorporating will do that for you, and the likelihood of others trying to use the name you’ve chosen for your group is slim. Visit your Secretary of State’s website and conduct a business entity search using the name your group wants to use. If no entities are found, you are safe to proceed.
You do not need to engage an attorney in this process. We’ve helped many organizations through incorporation seamlessly. Save any willing attorney’s time for issues where you may need assistance down the road.
You must file articles of incorporation by submitting a document (ask for our template) or completing a form provided by your state (check your Secretary of State’s website for a downloadable form, or simply call them to request a form). Most states also provide the option of completing your incorporation online. You will need to pay a nominal (usually $25-$75) filing fee with your application. Your approved Articles of Incorporation will be requested by the IRS when your group decides to file for federal tax-exempt status (and they also are a submission requirement for applying to AMIBA’s 501c6 Group Exemption Program. Our organizing document templates include the language required to ready your organization for applying for federal 501(c)(6) tax exemption down the road. Following this template will save time and money in the future (we also can help you if you are exploring a different tax-exempt status).
Your articles of incorporation form likely will ask whether or not your organization will have members. We strongly recommend you state your organization will not have members. “Members,” to the Secretary of State’s office, means a membership that will vote for a board of directors and other decisions, not a general membership that belongs to an organization and pays dues. The “members” designation also requires you to hold an annual membership meeting at which time such voting occurs, and can be an enormous burden to manage the administration and fulfill a quorum. You can call your businesses “members” without the formal designation, and this does not preclude your IBA from operating democratically, which we encourage.
Be aware the greater influence IBAs have in their communities, the greater the interest may be to co-opt them to conform to a different agenda. One of the easiest ways to do this is to inject politics into the organization through the board, the decision-making body. Imagine one or more individuals who find your ideas to be threatening or your mission out of alignment with the approach they think it should take joining your IBA. They run for your board by lobbying enough business owners to gain seats. You then are vulnerable to being steered from your initial mission–or being dissolved (this has occurred in other organizations).
The IBA/Local First concept still is a curiosity or even a threat to some people or other existing organizations. You stand a greater chance of ensuring your organization remains true to its mission by maintaining a board that is self-selecting – and putting care into selecting your board members.
IMPORTANT: If your group intends to file for federal tax-exempt status, you have 15 months from the date of your incorporation to do so. The IRS also requires you to start filing a form 990 (990N postcard, 990 EZ, or full 990) the first year after you incorporate. The deadline for submitting the 990 is 5.5 months after the end of your fiscal year. If you intend to participate in AMIBA’s 501c6 Group Exemption Program, your fiscal year will need to be the same as AMIBA’s: January 1 – December 31. Thus your form 990 filing deadline would be May 15 annually.