Tennessee Guidelines for a Nonprofit Business

Both Tennessee and federal laws regulate much of how a nonprofit is set up and operates, from how it selects a name to how it files its Articles of Incorporation and what it needs to do to file tax-exempt status with the IRS. The state also imposes annual reporting requirements on all nonprofits.

Someone starting a nonprofit in Tennessee must follow the state's guidelines when naming it. Nonprofits can be corporations, but may also be unincorporated organizations, trusts, associations or limited liability companies (LLCs).

The company name must be distinct from any other registered or reserved business names in the state. The Tennessee Secretary of State has an online name search that a nonprofit can use to make sure its not using another business’ name.

The Volunteer State does not require nonprofits to use identifying terms like “incorporated,” “corporation,” or “limited partnership.” However, if the business uses the words bank, banks, banking, credit union or trust in its name, it must get written permission from the Tennessee Department of Financial Institutions to do so.

Tennessee requires all nonprofits to have a registered agent to keep the business compliant and to accept legal documentation and official mail on the nonprofit’s behalf. Anyone can be a registered agent if they meet certain requirements. They must:

• Be at least 18 years old.
• Be a state resident.
• Have a physical address in Tennessee.
• Consent to the agent appointment.
• Maintain normal business hours.

At least one incorporator is required by law to deliver the nonprofit’s charter to the Tennessee Secretary of State for filing. The nonprofit also needs three people to serve on the board of directors; they cannot be related and have a one- to five-year term of service or until there is a successor.

The nonprofit also needs officers to serve as the president and secretary, and one officer must be designated to take minutes for board meetings.

Bylaws serve as a guideline for a nonprofit’s internal management. Both Tennessee and federal laws require bylaws before filing Articles of Incorporation and applying for federal tax-exempt status.

The organization is also required to have a Conflicts of Interest policy to protect its best interests. This is to ensure there is a process in place if a board member or a stakeholder decides to further their own agenda over the nonprofit’s.

After selecting an organizational structure, the nonprofit is required to file the Articles of Incorporation. The document must contain:

• Name of the nonprofit.
• Name and address of the nonprofit's primary location.
• Registered agent’s name and address.
• Incorporator’s name and address.
• Statement that the business is a not-for-profit entity.
• Statement indicating that the nonprofit will not engage in activities not related to its purpose or mission statement.

Additionally, the Articles need supporting documents when filing for federal tax exemption status. These are:

• Statement declaring the organization’s purpose or mission and whether it is a public benefit, mutual benefit or religious corporation.

• Dissolution clause stating the fate of the organization’s assets in the event it is liquidated or dissolved.

The individual filing the Articles of Incorporation will send the Articles and supporting documents to the Tennessee Secretary of State-Division of Business Services. When they are approved, the nonprofit will receive the Certificate of Incorporation.

Employer Identification Numbers (EINs) are assigned to nonprofits and for-profit businesses by the Internal Revenue Service (IRS). This nine-digit number identities business entities in each state. All nonprofit organizations must have an EIN. To file, IRS Form SS-4 file must be completed and submitted online to the IRS.

The nonprofit will also need to obtain federal tax exemption status through the IRS. To receive eligibility, the nonprofit must have:

• Three or more directors who are not related to each other.
• An Employer Identification Number.
• Adopted its laws and compiled a Conflicts of Interest policy.
• Filed its corporation charter with the provisions required by the IRS.

After these requirements have been met, the filer can fill out IRS Form 1023, or if they are a small business, they’ll complete IRS Form 1023-EZ to apply.

It is not necessary for nonprofits that have an IRS Determination Letter stating they have federal tax-exempt status to file for Tennessee income tax exemption. The federal determination makes the nonprofit exempt automatically.

Tennessee nonprofit organizations still need to file for sales tax exemption from the state. They can do this by completing and filing Form RV-F1306901 with the Tennessee Department of Revenue.

All nonprofit organizations and public charities in the Volunteer State must register with the Tennessee Department of State Division of Charitable Solicitation and Gaming, particularly if they plan on fundraising.

However, Tennessee exempts some nonprofit charitable organizations from registering. They include:

• Religious organizations.
• Educational organizations.
• Nonprofits earning up to $30,000 nationwide annually.
  
• Volunteer fire departments, rescue squads and civil defense organizations.

All Tennessee nonprofits will pay fees when filing:

• Articles of Incorporation: $100.
• Federal income tax or IRS 501(c) Application: $600 (Form 1023); $275 (Form 1023-EZ).
• Tennessee charitable registration: $50 (free if exempt).
• Employer Identification Numbers are free to businesses.

All Tennessee nonprofit corporations must file an annual report with the Tennessee Secretary of State. The report is due prior to the first day of the fourth month after the organization's fiscal year closes and may be filed online.