A nonprofit organization is a type of business entity that operates for charitable or educational purposes and does not distribute profits to owners or shareholders. Nonprofits must follow the incorporation laws of each state where they are doing business. Relocating a nonprofit corporation to another state can be complex, as it involves meeting the legal requirements for closing down the business in one state and starting in another.
Relocation and Registration
To begin operating as a nonprofit in most states, you must start fresh by filing to incorporate as a nonprofit organization under that state's laws. You must also obtain either a new Tax Identification Number or Employer Identification Number from the IRS and a state employer identification number or payroll identification number, if required by the new state. In most states, because you are effectively starting a new legal entity, you must also reapply for federal tax exempt status. The District of Columbia and a few states, like Virginia and Pennsylvania, allow a nonprofit corporation to file domestication papers instead of reincorporating, though only if it is moving from a state with similar domestication provisions. Domestication allows your nonprofit to keep its existing federal tax exemption, but other requirements of state law must still be met.
To cease doing business in your former state, you must dissolve your nonprofit corporation in accordance with the laws of that state. This process includes adopting a resolution dissolving the organization, closing out the books and filing any final state reports and tax documents, paying all outstanding debts and distributing any remaining assets. If the nonprofit has federal tax-exempt status, or if state laws require, the assets of the organization remaining after debts have been paid might have to be distributed to other qualifying nonprofit organizations. If you have set up and registered your nonprofit in the new state, you may be able to transfer the remaining assets to the new entity in the new state.
Any corporation, including a nonprofit, must follow the management rules of the state where it is located. If you move your nonprofit to a new state through domestication or reincorporation, you must comply with the new state's laws regarding annual report filing, number of trustees or directors, and all other management mechanisms. The rights and obligations of members and the requirements for record keeping, including meeting minutes and membership logs, vary from state to state and may be amended by state legislatures. Up-to-date information on your new state's nonprofit laws is critical to ensure compliance with legal requirements.
Moving your nonprofit organization to another state does not necessarily mean that you need to terminate the organization in the old state and re-create it in the new state. An alternative is to register to do business in the new state as a foreign nonprofit corporation. You will need to obtain any tax exemptions and payroll identification numbers from the new state, and comply with the reporting requirements of both states, but this can be simpler and less expensive than dissolving the nonprofit in one state and reincorporating it in another. If you change your bylaws or articles of incorporation in your home state, you will likely need to file an update with the state in which your nonprofit registered as a foreign corporation.
- Hurwit and Associates: Nonprofit Law Resource Library Question & Answer
- Whiteford Taylor Preston: What Associations and Nonprofit Organizations Need to Know About the New DC Nonprofit Corporation Act
- Texas C-Bar: How to Dissolve a Nonprofit Corporation in Texas
- Arizona Corporation Commission: Frequently Asked Questions
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