Yes. An LLC in the State of Florida may have a ‘lawful purpose’ regardless of whether the company is a for-profit or nonprofit company. While an LLC established for a nonprofit purpose would definitely provide the members with limited liability, note that it comes with other significant issues especially when it comes to obtaining federal tax-exempt status.
The IRS has noted that an LLC will only be accorded tax-exempt status if all the members of the LLC are exempt organizations. Individuals who start and run nonprofit organizations in the State of Florida do so with the initiative to change their communities or maybe the world.
They tend to have very extensive and genuine goals for others and low expectations of making profits for themselves. Starting a nonprofit can be fulfilling, but the process of forming one in the state of Florida can be quite challenging.
Like all states, Florida has its own laws and regulations that you will be expected to comply with when forming a new nonprofit corporation. LLCs are most often not formed as nonprofit organizations especially since most people find the process very complicating and tend to realize that forming as a nonprofit corporation is more straightforward.
Since every member of the nonprofit LLC will have to be tax-exempt, the stress and complex processes might not really make sense, especially in the state of Florida. Note that each owner would first have to incorporate as a nonprofit corporation and then form a tax-exempt nonprofit.
Conditions to Qualify as a Nonprofit LLC in the State of Florida
When looking to form a nonprofit LLC in the State of Florida, note that the IRS reserves the right to decide on your tax-exempt status. Each member of the LLC will be expected to be a tax-exempt organization, and the following twelve rules will also apply.
- Organizational documents will need to include an easy-to-comprehend statement limiting LLC activities to one or more exempt objectives.
- The language in your organizational documents will need to explicitly state that the LLC will only be operated to further the charitable purposes of its members.
- The organizational language will also require LLC members to be section 501© (3) organizations, governmental units, or fully-owned instrumentalities of a state or political subdivision of it.
- The organizational language will need to restrain any direct transfer of any LLC membership interest to a recipient other than a section 501© (3) organization or to a governmental unit.
- The organizational language will also be expected to state that the LLC interests or assets may only be transferred to a nonmember other than a 501© (3) organization, governmental unit, or instrumentality in exchange for fair market value. Simply put, LLC interests will only be sold for fair market value to any other business that is not one of those described as a 501©(3) organization, governmental unit, or instrumentality.
- The organizational language will also have to state that upon dissolution of the LLC, the LLC assets meant particularly for charitable purposes will continue to be meant only for charitable purposes.
- The organizational language will have to require any amendments to LLC articles of organization to be consistent with section 501© (3).
- The organizational language will also restrict the LLC from merging with, becoming, or converting into, a for-profit business entity.
- The organizational language will also mandate that the LLC not distribute any assets to members who are no longer organizations – described in section 501© (3), governmental units, or instrumentalities.
- The organizational language will also need to contain an acceptable contingency plan in the event one (or more) member ceases to be a 501© (3), governmental unit, or instrumentality.
- The organizational language will have to note that the LLC exempt members will execute all their LLC rights to pursue all legal and equitable remedies to protect LLC interests.
- Organizing document provisions will need to be consistent with Florida LLC laws, and enforceable at law and in equity.
Note that once you can meet all of these requirements when starting a nonprofit, the IRS will authorize you to form a nonprofit LLC in the State of Florida.
How to Form a Nonprofit Corporation in the State of Florida
If you are looking to form a nonprofit corporation in the state of Florida, here are steps to follow;
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Name your organization
Note that the first step in forming a nonprofit organization in Florida is to choose the perfect name for your organization. You must ensure that your name is memorable and speaks directly to the community you intend to serve.
When choosing a legal name for your organization, ensure that it doesn’t in any way conflict with any other organization registered in the state. In the state of Florida, the name you choose should not contain words that have any form of affiliation with government agencies or contain the words “company” or “Co.”
Your nonprofit will be a corporation in the state of Florida and will be expected to include either: a corporation, incorporated, Corp, or Inc. After you must have chosen your name, ensure to reach out to the Florida Department of State to search their system. If the name is available, you can claim it immediately as your own.
Appoint a Registered Agent
A registered agent refers to an individual or business tasked with receiving your organization’s legal documents. They will have to be a Florida resident or have an office located in Florida that is open during regular business hours.
The state of Florida definitely permits nonprofits to use a registered agent service that has an office in the state. These services are known to forward updates to the organization to remind them of filing requirements. They can also aid find accountants, and legal professionals, and keep a backup of corporate documents.
Select your Directors and Officers
Note that the leadership of your organization will have a very massive influence on its success. Have it in mind that the decisions you make here will definitely be long-lasting, especially since making changes to your leadership as your organization grows can be quite difficult.
Nonprofit leadership is tasked with the organization’s programs, budgets, fundraising, and more. They will also have a financial responsibility to the organization.
Selecting a team that supports the mission of the organization is very critical in this step. Finding a team that brings a wide array of skills and community connections will also be very necessary. Nonetheless, the organizational structure of your nonprofit in Florida must include:
- At least 3 directors are not related to each other
- At least 1 officer who is tasked with recording meeting minutes
Establish Nonprofit Bylaws
Your bylaw is the legal document that contains how and when your officers and directors will be elected. Bylaws also state how and when your board of directors will hold meetings. It will be expected to stipulate what qualifies as the quorum in these board meetings, your organization’s membership structure, and other organization operations.
Most often, your bylaws will be used to evaluate your level of accountability and transparency. In the state of Florida, this document is very important, especially when applying for grants, sponsorships, or seeking significant donors. A properly run organization will have more success when looking for outside funding.
The IRS does not stipulate any specific language to use in your bylaws; however, there are best practices that you may want to consider to ensure success. The Florida Association of Nonprofits also has numerous samples of bylaws online that may help you put together your own.
File the Florida Articles of Incorporation
To register your nonprofit, you will be expected to file the Articles of Incorporation with the State of Florida. To make sure your nonprofit qualifies to apply for 501© (3) status, in the Articles of Incorporation you will be expected to clearly state the following:
- Purpose: Note that to qualify for 501©(3) status, the organization’s purpose will have to be limited to one or more of the following: Charitable, Religious, Scientific, Educational, Literary, Fostering national/international amateur sports competition, Preventing cruelty to animals/children, Testing for public safety
- Dissolution: You will also have to state in vivid detail what the assets of the organization will be used for, and what will happen to the assets if the organization is dissolved.
To qualify for 501© (3) status, the assets of your organization will only ever be used for purposes approved under section 501© (3).
Apply for an Employer Identification Number (EIN)
An Employer Identification Number (EIN), or Federal Tax Identification Number (FTIN), is used by the federal government to identify a business entity. It is more or less a social security number for the company. You will need an EIN to carry out the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
To apply for your EIN, IRS Form SS-4 must be filed online or by mail.
Apply for Federal and Florida State Tax Exemptions
This is another very vital step when creating your nonprofit in the United States and Florida. Have it in mind that all nonprofits applying for tax-exempt status are expected to request an exemption under Section 501© of the Internal Revenue Code – FORM 1023.
Note that your tax exemption may take several months for the IRS to process, but you can continue state and county tax-exempt filings while you wait. Don’t forget that there are fees for filing for tax-exempt status with the IRS. If you file with Form 1023-EZ, the user fee will be $275. If you do not qualify for Form 1023-EZ, your user fee will be $600.
In the state of Florida, a nonprofit corporation is automatically exempt from Florida’s corporate income tax unless it has “unrelated trade or business income.”All nonprofit organizations that are eligible for tax-exempt status with the IRS are also exempt from state sales taxes in Florida.
However, you may have to obtain a Consumer’s Certificate of Exemption to ensure that you can get a sales tax exemption on items and services used in the organization’s nonprofit activities. This certificate is valid for five years.