The first legal step in forming a non-profit corporation is to file Articles of Incorporation through your State’s Secretary of State or similar State subdivision. Each State has different requirements for the Articles of Incorporation. Your State’s Secretary of State should have on-line instructions to guide you in preparing and filing your Articles of Incorporation. Many States have simple, on-line filing processes.
Due to the number of countries outside the U.S. with affiliate members of The Blues Foundation, it is not possible to cover all of the legal issues in those jurisdictions. However, the Foundation strongly encourages international affiliates to register as non-profit corporations in accordance with their local laws or regulations.
From a tax standpoint, the Internal Revenue Service requires that your Articles of Incorporation contain provisions which limit the society’s purposes to exempt purposes (charitable, scientific, educational) as set forth in the Tax Code and that does not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further those purposes. In addition, an organization’s assets must be permanently dedicated to an exempt purpose. To establish that an organization’s assets will be permanently dedicated to an exempt purpose, the organizing document should contain a provision ensuring their distribution for an exempt purpose if the organization dissolves.
To comply with these requirements, the IRS has provided the following sample provisions for your Articles of Incorporation:
The corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code
Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.
It is strongly recommended that your Articles of Incorporation use the language suggested by the IRS. Failure to follow these guidelines may result in the denial of your application for non-profit status.
Most States require that you file an Annual Report which renews and updates your organization’s corporate status. You should determine what your State’s requirements are and follow them to ensure that your Blues Society maintains its legal corporation status.