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There isn’t a single state where starting up a nonprofit will be simple, nor should it be. When you are starting up a nonprofit, you are showing a commitment to help others out. That nonprofit designation is a promise to those that you benefit and your donors. It is a promise that you need to live up to. If there wasn’t some sort of difficulty in starting up a nonprofit, every potential business owner would be trying to set one up to avoid tax obligations.

That being said, the process to start a nonprofit in Colorado is far simpler than in some states. Don’t get us wrong. It is something that you will likely need to work with a lawyer or non-profit expert to navigate, but you shouldn’t expect to have to jump through countless hoops and fill out numerous forms to get your nonprofit up and running. There are a few basic things that you need to do.

The Costs

The costs are probably going to be the biggest barrier to opening up a non-profit organization in Colorado, but these are going to be minimal:

• You must pay $50 to file your Articles of Incorporation
• Naming your nonprofit will cost $25
• You must pay either $400 or $850 to the IRS to apply to be a nonprofit. This fee is based upon the expected income for your nonprofit.

So, at the most, the filing of the forms will cost you under $1,000. There will be extra costs outside of this i.e. your initial marketing costs, lawyer fees, setting up your website, etc. However, from the purely legal form standpoint, expect to pay under $1,000. 

The Initial Opening

Of course, you aren’t just going to be submitting blank forms to become a nonprofit, you are going to need to put a bit of effort into completing those forms. This is where a lawyer can guide you professionally. We will give you an overview of the things that you will need to consider here, just so you know the commitment that you will need to have to document and form filling. Although, to be honest with you, there isn’t that much extra work that you will need to do beyond what you would have to do to start up a normal business.

Articles of Incorporation

You can think of the Articles of Incorporation as ‘guidelines for your nonprofit. They have to be approved with the management team of the nonprofit.

Your Articles of Incorporation will include information such as the purpose of your nonprofit, as well as extra information on how you intend to distribute any assets that your nonprofit owns.

Luckily for you, filling in these forms isn’t really as scary as you may think. Colorado does provide sample forms that you can use to build a basic outline for your Articles.

IRS Forms

The IRS is going to need a few different forms from you.

The most important will be IRS Form 1023. This is the form that allows you to apply to be exempt from certain taxes. Make sure that you fill this in properly. If you get it wrong, then the idea of running a nonprofit will completely crumble.

If the IRS approves you as a nonprofit, they will send you the IRS determination letter. This is proof that you are a nonprofit. If you don’t have that letter, you will pay taxes like a standard business.

You will also need to apply as an employer. This is Form SS-4 with the IRS.

Submission to the State of Colorado

You already know that your Articles of Incorporation will be heading on over to the Colorado Secretary of State.

You will also need to file Form DR 0715 with the Colorado Department of Revenue. This is you telling the state that you are exempt from taxes, much in the same way that you told the IRS that you were exempt from taxes.

The Record Keeping

Perhaps the most difficult part of starting up a nonprofit is the recordkeeping that you are committing yourself to for years and years to come.

You must keep meticulous records of any income and expenditure for your nonprofit. Everything that you spend your money on should be related to the initial aims of your nonprofit. If it is not, then you need to pay tax.

You also need to keep records of any official meetings the directors of the business have. While it is unlikely anybody is going to ask to see them, they are vital to helping prevent issues in the future.

Each year, you will have to complete IRS Form 990 and return forms for Colorado.

Once you get into the swing of things, it is second nature. The recordkeeping shouldn’t be that difficult from running a normal business anyway.

Final Word

While starting up a nonprofit is going to be a little bit more difficult than starting a standard business, this is to be expected. However, Colorado does try and make it as simple and as affordable as possible. After all, more nonprofits mean more good work can be carried out. Work with a lawyer or a nonprofit expert, and we are sure that you will have that nonprofit up and running in no time at all.