Starting a Maine Nonprofit
Bringing your vision to life
Maine is lucky to have so many people who are passionate about making the world a better place. Is starting a nonprofit the right way to channel your changemaking energy? We hope this resource page will help you along your way.
What is a Nonprofit?
The nonprofit sector is the collective name used to describe institutions and organizations in American society that are neither government nor business. Other names often used include the not-for-profit sector or charitable sector.
Within the broad category “nonprofit” there are many types of organizations. This section of our site focuses on starting a Maine nonprofit corporation with tax exemption under IRS code 501(c)(3), though much of the information applies to starting other types of nonprofits as well.
This glossary of nonprofit terms may be useful in understanding information throughout this page.
The following checklist provides basic guidance for how to start nonprofit in Maine. This is not a comprehensive breakdown or a definitive list of rules and requirements; it is intended to provide an overview of one way to start a nonprofit in Maine.
Furthermore, the process is different for each new nonprofit and the order of the items may change or overlap. Depending on the activities of your organization, other steps may be necessary that are not listed here (such as acquiring special licenses or permits or employment documentation).
*Important Notice: Form changes occur periodically to implement new requirements. Forms referenced below may occasionally be eliminated, revised, or replaced. Before submitting forms for filing, please be sure that you have the most recent version.
Starting a nonprofit is one way, but certainly not the only way, to make a difference! With over 7,000 nonprofits in the state of Maine and over 1.5 million in the nation, starting a new nonprofit may not be the best solution to the problem you’re seeking to solve. It takes significant resources, both human and financial, to sustain your mission and organization over time, and talking to similar organizations about possible collaboration is often the best move that you can make.
The following articles and guides can help you to think through your options.
- Starting a Nonprofit? Do you really want to? (BoardSource)
- What are the advantages/disadvantages of becoming a nonprofit organization? (Candid)
- The Challenges of New Nonprofits (Nonprofit Quarterly)
- 8 Alternatives to Starting a Nonprofit
- Making the Choice Between For-Profit and Nonprofit
If you have a name in mind that you wouldn’t want to be taken by another group while you organize, you should start with this step. Application for Reservation of Name ($5 fee)
In Maine, your board must have a minimum of 3 individuals. We recommend that your board be made up of at least 5 persons unrelated to each other or to the staff.
Along with key stakeholders, such as board members, draft statements that describes the purpose of your organization (what you do and for whom) and your vision (an inspirational decription of what success look likes). These statements will be key tools for getting others involved as volunteers, donors, and supporters.
Find resources on developing mission statements in our resource library.
Articles of Incorporation are a legal description of your organization and the powers given to the board. While not all groups incorporate, it is recommended if you are going to apply for tax-exempt status. (See the FAQ section below).
- About forming a corporation in Maine (Form MNPCA-6, Filing Fee: $40)
- Learn about the difference between articles of incorporation and bylaws.
Bylaws specify how the board will operate and should be approved by the board. If your organization will have legal members, some of this information will be needed for Step 4.
Find more information on bylaws in our resource library.
- Banking: Seek a bank that understands the needs of new, small nonprofits. In order to open a bank account under the name of the organization, you will need an Employer Identification Number (EIN) from the IRS, even if no employees are anticipated. Read the IRS’s guidance on when and how to procure an EIN number (Pay special attention to the fact that once an EIN is procured, your organization will need to begin filing a tax return with the IRS or risk automatic revocation of tax-exempt status.)
- Accounting System: Find an accountant or other finance expert who will help set up a basic bookkeeping system; your board Treasurer can be helpful in this regard if they have nonprofit experience, but not that nonprofit accounting is unique from for-profit accounting. Use MANP's Business Finder to find firms with nonprofit expertise.
- Insurance: Consider which insurances you will need. Find more information in MANP's resource library.
What is the impact you are trying to make, what strategies will you use to make it, and what resources (human and financial) do you need to get there? This stage includes developing a budget, a resource development plan, potentially a staffing structure (or structure for volunteers), a communications strategy, and methods for measuring progress.
Maine and federal laws regulate certain transactions in which conflicts of interest are present. In order to ensure compliance, a conflict of interest policy is strongly encouraged. If the organization will apply for 501(c)(3) status, a conflict of interest policy is especially recommended, as the Form 1023 inquires about the existence of such a policy. Similarly, the annual Form 990 asks about key governance policies, such as whistleblower protection, document retention and destruction, executive compensation, gift acceptance, etc.
Nonprofits apply to the IRS for tax-exempt status (to be exempt from paying federal taxes) by completing Form 1023 ($600 filing fee) or 1023-EZ ($275 filing fee). Review the Form 1023-EZ eligibility worksheet to see if that path is an option for your organization.
As of January 31, 2020, both of these forms must be submitted electronically. The board should approve this filing before submission. This can be a lengthy process (both completing the application and waiting for your determination letter.) The IRS has an information center including a webpage to help you understand when you can expect to hear back. You can also call (877) 829-5500.
Some organizations identify a fiscal sponsor either while they wait, or as a more permanent alternative to pursuing their own tax-exemption.
Find many more resources about fiscal sponsorship in our resource library.
Note: If your organization will generally have annual gross receipts less than $5,000, there is another approach to consider. Read our white paper on self-declared 501(c)(3) nonprofits.
Federal nonprofit designation does not automatically qualify an organization for a sales tax exemption in the State of Maine. Organizations must apply to the state for this exemption. Some nonprofits, such as hospitals, schools, churches and libraries, are eligible for the exemption from paying Maine Sales Tax on goods and services purchased. Other organizations meeting certain requirements may be as well.
Learn more about who qualifies for sales tax exemption.
If your organization will conduct any fundraising solicitations, it must comply with Maine’s Charitable Solicitations Act, which may involved filing an application and reports with the State of Maine Department of Professional & Financial Regulation. If minimal fundraising activity is anticipated you may be exempt from registration and reporting requirements.
Once your organization has status as a tax-exempt nonprofit organization, be sure to stay in compliance.
- The IRS has a IRS’s Stay Exempt website and mini courses.
- We also recommend Nonprofit Risk Management Center’s How to Lose Your 501(c)(3) Status Without Really Trying and the Maine Office of the Attorney General Guide for Board Members of Charitable Corporations.
- MANP’s Guiding Principles + Practices for Nonprofit Excellence in Maine also provides a set of recommended practices you can work toward over time.
A mission statement is a brief description of your organization’s purpose. Crafting a clear mission statement that captures what you do and why in one or two sentences is important to unifying and motivating your supporters. Visit MANP's resource library to find advice on writing a compelling mission statement.
There are many advantages to incorporating your nonprofit. If your group is the target of a lawsuit, incorporation can protect you from personal liability. Qualifying for tax exempt status from the IRS as a nonprofit corporation is easier. Unincorporated nonprofits applying for a tax-exempt status from the IRS are required to prepare and adopt a complicated set of organizational paper and operating rules. Learn more about the pros and cons of incorporating as a nonprofit.
Maine law requires three board members, but we recommend having at least five people who are unrelated to each other or to staff, to ensure appropriate deliberation, diversity of perspectives, and to protect the organization from falling out of compliance during board member transitions.
Speak with your friends, neighbors and colleagues, as well as people who do similar work with other organizations. Look for those people who share your passion for your vision, and who bring the skills and experience necessary to best meet your new organization’s needs. Learn more about forming the nonprofit's first board in this article from BoardSource. Find more resources in MANP's resource library.
Yes, but you may be required to be licensed through the Maine Department of Professional and Financial Regulation, Office of Professional and Occupational Regulation under Maine’s Charitable Solicitations Act. Donations received before you have your 501(c)(3) status may not be tax deductible for donors. Donor acknowledgements should provide your EIN and indicate that determination of tax-exemption is pending. Once you receive your determination letter you can follow up with donors.
Unrelated Business Income (UBI) is income from a regularly-carried-on trade or business that is not substantially related to the organization’s exempt purpose. This income is subject to a tax. Determining whether or not your activities result in a tax is sometimes difficult – merely using the money received to support your charitable purposes is not enough to exempt the income from taxation. The IRS has created a tutorial.
All nonprofits that qualify as public charities under the IRS code 501(c)(3) are exempt from federal corporate income taxes. Some are also exempt from state and local property and sales taxes, which require separate application processes. Nonprofits are not exempt from withholding payroll taxes for employees, and they also are required to pay taxes on income from activities that are unrelated to their mission.
No. Federal nonprofit designation does not automatically qualify an organization for a sales tax exemption in the State of Maine. Organizations must apply to the state for this exemption. Some nonprofits, such as hospitals, schools, churches and libraries, are eligible for the exemption from paying Maine Sales Tax on goods and services purchased. Other organizations meeting certain requirements may be as well. Learn more about who qualifies for sales tax exemption.
If you own property, you may be exempt from paying property taxes to the municipality in which it is located. An application form must be completed and submitted to the municipality in which your property is located.
A fiscal sponsor is an organization that receives and administers your funds. This organization is accountable to the IRS for your activities. In searching for a fiscal sponsor, you should seek out organizations that have demonstrated an interest in programs or projects similar to yours. It will be easier to find a fiscal sponsor if your project enhances or furthers that organization’s charitable purposes and/or if that organization benefits in some way from being associated with your project. Find many more resources about finding and structuring fiscal sponsorships in our resource library.
Yes. Operating any organization at a deficit or without a sufficient “rainy day” fund is not good business. In order to maintain the viability of any organization, it is important to operate with some “net revenue” at the end of a year. What distinguishes nonprofits is not whether they can make a profit, but what happens to those profits. Nonprofits are prohibited from distributing profits to shareholders and all revenue must be used to further the organization’s mission.
A registered agent is a person who is willing to be the contact for the organization with the Secretary of State’s office. This person should have a long-term commitment to the organization and a stable mailing and email address. This is where reminders (electronic) to file your annual report may be sent and who the Secretary of State would contact if there is a need. Some organizations hire a lawyer or other individual to do this, but most choose the board president or other committed individual, and it is important to remember to update this point of contact when there is leadership change. If you do hire someone, that person would be a “Commercial Registered Agent”. The Secretary of State maintains a list of persons or firms willing to be a Commercial Registered Agent.
The IRS receives more than 95,000 applications for tax-exempt status each year and has been experiencing long delays in processing applications. Visit this IRS webpage to see their current schedule for processing applications.
This article presents the different ways to move a nonprofit to another state. Note, however, that whether "domestication/conversion" is allowed varies from state to state, and while Maine allows for-profits to convert, at the time of this writing it does not allow nonprofits to do so. Options 2 and 3 in the article above apply in Maine.
When first getting started, many nonprofits look for consultants, coaches and mentors to assist with strategic, legal, and operational steps. MANP is not able to provide in-depth or personalized assistance with the start-up process. We suggest the following resources:
SCORE offers free coaching/mentoring to nonprofits, including during the start-up phase.
- They ask that people complete this readiness checklist (in English or French) before requesting a meeting with a mentor. You don’t necessarily have to have answers to everything on the checklist, but completing it will give you a sense of the questions a mentor is likely to ask as well as help you narrow in on where you need their guidance.
- You can then request a free meeting with a mentor.
Resilia Formation Services
Resilia offers nonprofit formation services including Articles of Incorporation, state filing, application for tax-exemption, and access to various templates, tools and tutorials for start-ups.
- Maine nonprofits save 10% off their nonprofit formation packages (regular price starts at $699).
Attorneys + Consultants
An attorney can help you create foundational documents and policies and file paperwork. Some will offer this type of support as a flat fee, which would include creation of the following: Articles of Incorporation, bylaws, filing for incorporation, support to Board’s organizational meeting, sample meeting minutes and agenda for organizational meeting, drafting a conflict of interest policy, filing IRS Form 1023 package, Maine charitable solicitation application (if applicable), guidance on what to expect for year-to-year filing requirements, etc.
- Find attorneys who specialize in nonprofits in the MANP Business Finder in the legal section.
Other consultants may be helpful as you develop a fundraising strategy, marketing plans, develop your board, and more.
- Find people who can help with all aspects of nonprofit management in the MANP Business Finder.