What is a nonprofit
A nonprofit corporation is a
formal organization of people committed to a particular purpose. Purposes
may vary, but their basis is some greater good, either of the society as a
whole or for a defined community of interest, and not for the individual
profit of those involved. Unlike for-profit corporations, a nonprofit
corporation has no shareholders, and nonprofit corporations do not
distribute profits. There are two kinds of nonprofit corporations under
state law--public benefit nonprofit corporations and mutual benefit
Can nonprofit employees
Some people believe that
nonprofit organizations are not allowed to earn a profit. If that was the
case, nonprofits would probably not exist. The reason for this confusion
is that nonprofits, unlike for-profit corporations, must invest their
profits back into their organization and may not distribute profits. As
long as the employees or officers of a nonprofit are not unjustly
enriching themselves, though, they can make a competitive salary. For
instance, development officers at hospitals and universities are usually
highly paid, because they work in a competitive field.
What is a public benefit
"'Public benefit corporation'
means a domestic corporation which is required to be a public benefit
corporation pursuant to section 17.05 or is formed as a public benefit
corporation pursuant to chapter 2." 11B V.S.A. § 1.40(28).
A public benefit corporation is the kind of
nonprofit most people think of. It is a charity. The public benefit
nonprofit corporation exists to provide a particular public benefit such
as a public library, an adult day center, or an arts council. Typically,
it is a public benefit nonprofit corporation that will obtain 501(c)(3)
tax exempt status from the IRS. In furtherance of its charitable mission,
if a public benefit corporation dissolves, then all of its property must
go to a another public benefit nonprofit corporation. The Vermont Attorney
General has the authority to take a public benefit nonprofit corporation
to court to ensure that it is being operated in the public
What is a mutual benefit
"'Mutual benefit corporation'
means a domestic corporation which is required to be a mutual benefit
corporation pursuant to section 17.05 of this title or is formed as a
mutual benefit corporation pursuant to chapter 2 of this title." 11B
V.S.A. § 1.40(23). A mutual benefit
nonprofit corporation is formed solely for the benefit of its members. An
example of a mutual benefit nonprofit corporation is a golf club.
Individuals pay to join the club, memberships may be bought and sold, and
any property owned by the club is distributed to its members if the club
dissolves. The club can decide, in its corporate bylaws, how many members
to have, and who can be a member. Generally, while it is a nonprofit
corporation, a mutual benefit corporation is not a charity. Because it is
not a charity, a mutual benefit nonprofit corporation cannot obtain
501(c)(3) status. If there is a dispute as to how a mutual benefit
nonprofit corporation is being operated, it is up to the members to
resolve the dispute since the corporation exists to solely serve the needs
of its membership and not the general public.
After Articles of
Incorporation are filed, what are the filing requirements?
Nonprofits must file a
Biennial Report every two years and it may be no more than 60 days late.
An organization must also pay its fees within 60 days, notify the
Secretary of State within 120 days that its registered agent or office has
changed, and notify our office if its registered agent has resigned or is
What happens if an
organization is "involuntarily terminated" by the Secretary of State's
Office for non-compliance?
The organization is considered not to be in
good standing and should no longer be doing a regular business in
The courts may also dissolve
a corporation. To learn more, see
V.S.A. § 14.30.
Why would an organization
If an organization fails to
file a report or pay its fees within 60 days, if it is without a
registered agent or registered office for 60 days, or if it fails to
notify the Secretary of State within 120 days that its registered agent or
office has changed, or fails to notify our office that a registered agent
has resigned or is deceased, the Secretary of State's office may start the
process of dissolving the corporation.
V.S.A. § 14.20
Why does an organization
need a registered agent?
Sometimes called a process
agent, the registered agent is required so that any entity wishing to file
a lawsuit against your organization for alleged crimes or civil violations
can establish jurisdiction over a real person who actually lives in
Do we get terminated if
our Biennial Report did not have the correct information?
If the report is corrected to
contain the correct information and delivered to the Secretary of State's
office within 30 days after your organization was notified about the
error(s) by the Secretary of State, it will be considered
Can a Board of Directors be held
liable for the acts of nonprofit corporation?
11B, Subchapter 3, Standard of Conduct, there are very specific
standards of conduct which are required of board of directors. These
standards emphasize good faith, ordinary care, and reasonableness, but not
perfection. In practice, a board of director who reads Title 11B, reviews
the nonprofit corporation's articles of incorporation and bylaws, and
performs his or her duties in a timely and reasonable manner will likely
be protected from liability under the law. However, a board member that
has a question about potential liability should consult with his or her
In addition, whether a board of director has complied
with the Standards of Conduct defined by law is a factual question. While
a board of director may ultimately be found not liable in a lawsuit, this
does not mean that he or she cannot be sued personally for actions taken
as a member of the board of directors. For this reason, many nonprofit
corporations purchase directors and officers liability insurance. Although
this insurance can be expensive, especially for the start-up public
benefit nonprofit corporation, it may be well worth the expense if the
nonprofit corporation or one of its board of directors is ever sued.
What are common reasons
that the Secretary of State's office rejects filings?
Incomplete forms are returned
unless fields are inapplicable or optional. If the form says it needs the
signature of a notary public--believe it!
application must be accompanied by a specified fee. No application
can be processed without the fee attached. Checks should be made
payable to the Secretary of State and don't forget to sign the
check! At the present time we do not accept credit or debit card
On occasion we receive an
application that we can't read - no matter how hard we try. If we
can't read it - we can't file it. We recommend that you type or
print your application. Some applicants purposely misspell
words in the business name in order to be unique, but others, make
unintentional spelling errors. For most of the application it
doesn't matter, but it does matter for the "name" - you should pay
particular attention to make sure that you have written the name of your
entity correctly. If we are not sure what you intend we may return
it to you for clarification, because once the name is approved - spelled
correctly or not - the only way it can be fixed is by filing another
document and another fee.
If the name you wanted is not
available, we may reject a form.
Also, the name that you use in your original Articles of Incorporation
must match our database (to the letter!), unless you have filed an
amendment to change that name. Please avoid using acronyms (e.g. YMCA for
Young Men's Christian Association) unless you have registered the
abbreviated version of your organizations name as a tradename.
Faxed or emailed filings will
be returned until there is a law permitting electronic filings of
signatures and until we are able to accept fee payments
How long will it take to
process an application?
Normal turn around time for
processing applications takes 3 to 5 working days. We do not have an
expedited service, but if you have an emergency and need a filing sooner,
and it is reasonable and within our power to do, we will gladly
accommodate you. Our busiest time of the year is between January and
April. This is the time that most corporations (between 17,000 -
22,000) choose to file their annual report. With this large volume
of mail, it is necessary for every one to assist with the sorting,
distributing, and opening the daily mail - even with added temporary help
the normal day-to-day processing takes longer. During this period of
time, hand delivering your application is highly recommended, if you have
a deadline to meet, however, hand delivering does not mean that we can
process your application while you wait - but it does assure you that your
application is opened, dated and will be processed with the current days
mail and not buried with the annual reports - in the yet to be opened
Can an application be
faxed or filed online?
Not yet, but stay
tuned. We will be happy to fax you a form or you can print the form
off the Internet, but an application can not be filed by return fax or
online. The main reasons are that all applications require an
original signature, fees must be attached, and as yet we don't have the
capability of filing forms electronically.
When do the letters
"Inc.", "L.L.C.", "Corp.", etc. appear after an organization's name
Certain entities require that
an ending indicator be attached to the name to indicate what type of
entity it is. For example, corporations (profit and nonprofit) must
use words like corporation, company, incorporated, or initials thereof and
partnerships must use limited partnership, limited liability partnership,
etc. or initials thereof. On the other hand, trade names cannot use
these types of indicators as a part of its name. Any application for
a trade name with "company" attached will be returned. Each form will
indicate the type of ending that is required for that particular
What are bylaws and do we need them?
Every nonprofit corporation
needs bylaws. The basic rule regarding bylaws is that they cannot conflict
11B (the nonprofit organization statute) or the nonprofit
corporation's articles of incorporation. Except for this basic rule, there
is wide latitude as to what can be in the bylaws. The bylaws are adopted
at the first meeting of the nonprofit corporation's board of directors.
The bylaws set forth a wide range of details that relate to the nonprofit
corporation's governance and operation. The bylaws address such issues as
who is on the board of directors and how long they serve; how a person
becomes a member and what are their rights and duties; and when the board
of director meetings will be held and how the meetings must be
Can I get an example of
what to include in bylaws?
Model bylaws are posted on
our web site and are available upon request from the Corporations Division
to use as a guide. Each nonprofit corporation is different, so the model
bylaws available from us are just an example. It is recommended that
you seek the advice of an attorney as you develop your bylaws.
Each nonprofit corporation
needs to evaluate its mission, consider how it wants to fulfill that
mission, and then adopt bylaws which carry out the mission. Bylaws are an
internal governance document; bylaws are not filed with the Corporations
Division. The bylaws are for the use of the nonprofit corporation and
ought to be read and understood by everyone involved. As new board of
directors begin their service, it is vital that they read the bylaws. It
is the entire board of directors responsibility to keep the bylaws
up-to-date in a corporate book which contains the nonprofit corporation's
other important documents like the articles of incorporation, certificate
of incorporation, and IRS 501(c)(3) approval letter.
Is there a difference
between a "trustee" and a "director"?
No. A Board of Trustees is
equivalent to a Board of Directors. Some nonprofits find it advantageous
to have a Board of Advisors and may choose to describe its powers in the
bylaws. A Board of Advisors has no legal authority, unless the bylaws or
articles indicate otherwise.
How do I find out if a
tradename is available?
You can do a preliminary name
search yourself by going to our database
or you can call us at 802-828-2386 and we will do a similar search for
you. It is important, however, that you remember that this is just a
preliminary search and is not an ok for you to begin using the name.
A name will not be available if there is an exact match or if a name very
similar is found. A final search will be conducted when your
conformed application is received in this office. Don't spend money
on advertising, letter head or put up any signs until the name is
officially approved by this office. If you think the name you have
chosen is questionable, you may want to attach an accompanying sheet of
paper listing alternate names, in order of your preference, and we will
approve the first name that is available. Once your business name is
approved you can begin using the name, but remember you have to use the
name exactly the way it is registered. You can't register "Joe's Bar
& Grill" and then put up a sign for "Joe's Bar." It is also important
that you understand that even if you receive a valid registration for a
name, it is not a guarantee that someone, somewhere may have a prior claim
to that name and challenge your use of it.
What is an Employer
Identification Number (E.I.N.) and what organizations need
An employer identification
number, or EIN, is also known as a taxpayer identification number, or TIN.
A sole proprietorship that has no employees and files no excise or pension
tax returns is the only business that does not need an employer
identification number. In this instance, the sole proprietor uses his or
her social security number as the taxpayer identification number. See Frequently Asked Tax
Questions and Answers.
How do I apply for an
employer identification number (E.I.N.)?
To obtain an EIN, you must
SS-4, Application for Employer Identification Number. After you have
completed the Form SS-4, you can obtain the EIN by mail, FAX, or by phone.
The instructions for Form SS-4 provide both an IRS service center address
and a phone number for Tele-TIN. For more information, refer to Tax Topic 755,
Employer Identification Number (EIN) - How to Apply, or Publication 1635,
Understanding Your EIN.
How does an organization
get a Vermont sales tax exemption?
The only nonprofits
recognized by the State of Vermont for sales tax exemption are federally
recognized 501(c)(3) organizations. To get a sales tax exemption form,
call the Vermont Department of Taxes at (802) 828-2551 and ask for Form
S-3-Resale and Exempt Organization registration.
It is not sufficient to
present an E.I.N. to a Vermont vender (e.g. copy shop, seamstress). The
Vermont Department of Taxes will assign a new number to eligible
organizations. It is this number that should be presented to
Who can I contact for
VERMONT ALLIANCE OF NONPROFIT ORGANIZATIONS:
VANPO membership can help you reduce your organizational "bottom
line" by providing group buying programs, discounted workshops
and classes. Members receive timely information on nonprofit
issues through VANPO publications and gain access to educational
and networking opportunities. Vermont Alliance of Nonprofit Organizations
(VANPO), PO Box 8345, Burlington, VT 05402. Phone:
VERMONT GLOBAL TRADE PARTNERSHIP:
Promotes assistance with exporting Vermont products and services, as well as importing into Vermont.
Contact number is (802) 828-1681. Website: http://www.thinkvermont.com/globaltrade
VERMONT AGENCY OF COMMERCE
AND COMMUNITY DEVELOPMENT: This agency hosts economic development,
housing, tourism, historical tax credit programs, and
commerce. Contact number is (800) 622-4553. Website: www.state.vt.us/dca
VERMONT BUSINESS ASSISTANCE
NETWORK: This network connects Vermont businesses with the government
opportunities, both state and federal, and a Vermont business
directory. Also, download "The Vermonter's Guide to Doing
Business", a handy reference at http://www.dca.state.vt.us/
DEVELOPMENT AUTHORITY (VEDA): Vermont offers a range of financing
options to help businesses succeed. Find out more information
by calling (802) 828-5627 or at www.state.vt.us/veda
VERMONT DEPARTMENT OF
TOURISM & MARKETING: The contact number is (802)
828-3237. Website: www.travel-vermont.com
DEPARTMENT OF LABOR: Offers a full range of workforce
related services and information through One-Stop Career Resource
Centers, throughout Vermont.
CONTRACTING WITH THE VERMONT AGENCY OF TRANSPORTATION: Small
Business assistance in the form of Disadvantaged Business Enterprise
(woman and minority owned business) and other programs which
provide contract opportunities with AOT. Contact number is
VERMONT AGENCY OF AGRICULTURE FOOD
& MARKETS: Is responsible for issuing licenses, certifications
and standards connected with agricultural, pesticides, greenhouses
and nurseries, grades and standards, weights and measures, and
labeling. Ask for the Vermont Specialty Food Resource
Guide if you are in that industry by calling (802) 828-2416.
VERMONT BUSINESSES FOR
SOCIAL RESPONSIBILITY: Phone: (802) 862-8347. Website: http://www.VBSR@together.net/
ASSOCIATION: Phone (802) 775-5460.
VERMONT SPECIALTY FOOD
ASSOCIATION: website: www.vermontherbgrowers.com Phone: (802) 828-3828.
VERMONT HANDCRAFTERS: Phone
VERMONT LODGING &
RESTAURANT ASSOCIATION: Phone: (802) 660-9001.
VERMONT RETAIL ASSOCIATION: website: www.vtretailers.com
Phone: (802) 879-6999.
VERMONT WOOD MANUFACTURERS
ASSOCIATION: Phone: (802) 828-3211. Website: http://www.vermontwood.com/
DIRECT MARKETING GROUP: Phone: (888) VTNHDMG. Website: firstname.lastname@example.org
If you don't find answers
to your questions here, you might try: