Maryland Tax Exempt Organization
A Maryland tax exempt organization is also referred to as a nonprofit organization and are generally formed in the same way as other business structures.3 min read
A Maryland tax exempt organization is also referred to as a nonprofit organization. Such businesses are generally formed in the same way as other types of business structures. There are similar requirements for most businesses when forming, such as choosing a name, choosing a business structure, filing an organizational document, obtaining an Employer Identification Number (EIN), and obtaining applicable licensing and permits.
However, every state has unique requirements for different types of businesses; nonprofit organizations are especially different in that they are formed not to make a profit, but rather have a charitable purpose to assist a certain population, whether it is assistance for children, those suffering from a substance abuse disorder, animals, wildlife, the elderly, or another category.
Choosing a Maryland Nonprofit Structure
In every state, there are categories of nonprofits that a business can be categorized in. The State of Maryland has three categories as follows:
- Tax-exempt nonstock
A religious nonprofit is one that is formed for a religious purpose. It could be a religious organization to help a particular Catholic church, synagogue, or mosque. The second category is a nonprofit organization that qualifies as a 501(c)(3) organization. You will be categorized as a 501(c) only if you apply for the federal tax exemption. The third category is the typical nonprofit organization – one that doesn’t qualify as a 501(c), but isn’t formed for religious purposes.
Prepare and File the Articles of Incorporation
You must have one of the officers or directors draft the Articles of Incorporation, which will include information regarding the business as follows:
- If the business is going to request to be treated as a 501(c)
- Category that the nonprofit falls into
- Number of directors, including their names, addresses, and responsibilities
You can choose to submit the form by mail, in person, fax, or online. There is a $100 filing fee, along with a $20 organization fee and a $50 development center fee if you also plan on requesting 501(c) status. If you want to expedite your submission, you can pay an additional $50 fee.
The State of Maryland takes roughly 10 weeks to process your submission. If you pay the expedited fee, you can expect a response within approximately 7 business days.
Obtain an EIN
You’ll need to obtain an EIN, or Employer Identification Number, for your nonprofit. All nonprofits are required to obtain this 9-digit identification number, even if the business doesn’t hire employees. You will need this ID number to open a business bank account, apply for 501(c) status, and to submit Form 990 to the IRS. There is no fee for obtaining an EIN, and it can be done quickly online.
Draft Policies and Procedures
While not required, it is highly advisable to create some sort of policy and procedure document. This will be a governing document for your nonprofit that can be used for future reference. It will essentially be the manual that all directors, employees, and officers can look to when they are unsure of something. If an issue comes along and there is nothing identified in the policy, the document should be amended to include such information.
Obtain Maryland State Identification Number
Any new business in Maryland is enrolled in Maryland property tax. You will need to register for a state ID number, (which is done on the Comptroller of Maryland’s website). You will need to submit form CRA (Combined Registration Application). You can submit it online or by mail. There is no fee associated with this form.
Apply for 501(c)
While this might seem like a difficult task, applying for 501(c) status can be incredibly beneficial for your nonprofit. You’ll be able to apply for grants, benefit from tax exemptions, and more. In order to apply for such status, you will fill out Form 1023 or 1023-EZ, which can be found on the IRS website.
After submitting your application, the IRS will then send you a determination letter identifying whether or not your application was successful.
Keep in mind that not all nonprofits qualify for this status, and it is best to have a professional assist in this application.
If you need help with learning about a Maryland tax exempt organization, or how to register your Maryland nonprofit organization, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.