Getting Started: Incorporation
Incorporating the society has several advantages. One of the most significant is to protect association members from personal liability for association obligations. In addition, a corporation has a perpetual existence so that changes in membership affect neither its continuity nor its right to retain assets and records. Corporations are granted a number of powers. These include the power to sue and be sued, complain and defend in the corporate name; have a corporate seal; to purchase, hold and deal with real and personal property; to make contracts and incur liabilities; to elect or appoint officers; to make and alter bylaws; to loan money for corporate purposes; to have an exercise all powers to effect any of the purposes for which the corporation is organized.
The first step is developing Articles of Incorporation, a legal document through which a corporation is formed. ASPS recommends that all societies be recognized as Illinois not-for-profit organizations because the state has laws and regulations that are generally friendly to associations. Articles of Incorporation confer the society's corporate existence and must also comply with federal tax laws.
Articles of Incorporation Requirements
- Corporate Name. You may choose any name as long as it is distinguishable from the name of an existing corporation in your state.
- Registered Agent and Office. A registered agent and registered office are required in order to provide a public record of a person and location where official correspondence from the Secretary of State is sent. Any change in either the agent or the office must be reported as soon as you know the change.
- Duration. The duration is the period of time the organization will be incorporated. It is perpetual, unless otherwise stated in the Articles of Incorporation.
- Purpose. The purpose is a statement of the function for which the corporation is formed. Legal counsel can assist with definition of allowable purposes.
- Directors. There must be at least three directors. Restrictions and qualifications may be set forth in the corporate bylaws.
- Incorporators. Legal counsel can assist with this.
- Other Provisions. These include tax-exempt status, with language written that conforms to specifications of the IRS code. Other provisions include restrictions and qualifications for who can be a member, an officer or a director, plus their duties. This information can either be a part of the Articles of Incorporation or the bylaws. Any other regulations regarding governing the internal affairs of the corporation can be included here, or included in the bylaws.
The completed Articles of Incorporation will be submitted by legal counsel to the Illinois Secretary of State for review and approval.
Next Steps: Post-Incorporation
Once the Articles of Incorporation have been received from the Secretary of State, legal counsel will then file them with the Recorder of Deeds.
After the society has been incorporated and receives the Articles of Incorporation from the Secretary of State, the society can apply for federal income tax exemption. This filing will require copies of both the Articles of Incorporation and bylaws, along with the appropriate application form.
There are typically two tax categories which apply to not-for-profit organizations such as ASPS or its component societies. These are 501(c)3 and 501(c)6. The primary difference between these is the amount of lobbying efforts to be conducted by the organization. 501(c)3 organizations may spend no more than ten per cent of their budgets for lobbying expenses. They are prohibited from undertaking activities on behalf of or in opposition to any candidate for public office. This prohibition includes amounts paid to a candidate for speeches, travel, polls, publicity or any other activities that promote the individual's candidacy.
There are no limits on lobbying expenditures for 501(c)6 groups, although there may be additional reporting requirements. In addition, a percentage of member dues cannot be deducted on their personal income tax filing. Federal tax law prohibits all corporations, including associations, from making campaign contributions to candidates for federal office. Contributions are defined as direct or indirect payments, gives of money, services or anything of value.
Federal Tax Identification Number
An Employer Identification Number (EIN) is a nine-digit number that the IRS assigns to all entities and it is required in order to file annual federal tax returns.
Reports and Filings After Incorporating
- Annual federal tax report (Form 990), due May 15
- Annual reports to the Secretary of State. The due date depends upon when the corporation was formed and the report is due before the corporation's anniversary month annually. The society's registered agent will receive these and ensure their completion.
- Annual reports to other agencies. The State Department of Revenue and Attorney General may require other annual returns, depending upon your status as a tax-exempt or non-tax-exempt corporation.
- Other reports to the Secretary of State. Any change in the corporate name, duration or purpose will require that the Articles of Incorporation be amended. Other changes include merger, dissolution or reinstatement, all of which require reports.