Organizational Structure



Amy Kriz, CPA

American Petroleum Institute (API)
Size of Organization: 

Incorporating your nonprofit organization establishes it as a legal entity designed primarily to provide limited personal liability protection for those overseeing the organization. The process of incorporation involves filing articles of incorporation with a state agency, typically managed by the Secretary of State's office.

Incorporation assists in streamlining business operations for an organization. By becoming a corporation, the organization gains a stable legal framework within which it can operate seamlessly. This stability enables the corporation to engage in various business transactions with ease, such as signing contracts, establishing bank accounts, and entering commitments that may require collateral or credit credentials beyond an individual's reach.

To incorporate, the organization must file articles of incorporation with the appropriate state government agency which is usually — but not always — under the auspices of the Secretary of State. The organization must follow the state nonprofit laws and register with every state where it engages in fundraising. The board’s responsibility is to ensure all these obligations are understood and handled on time.

Your articles are a binding legal document. Most states have straightforward forms that you fill out and then file with the state.

Name of the corporation
o Choose a name that reflects well your organization's purpose and that cannot be confused with another organization.
o Register your name to avoid anyone else using it later on. Contact your own office of the Secretary of State and see the links below for guidance and examples.

Purpose of the organization
o In your articles be as broad as you can to allow for future evolution of the organization's activities.

• Duration of its existence
o Most nonprofits are formed to exist in perpetuity.

Location of its offices
o Provide the address of its office or its ‘headquarters.

Names and addresses of the incorporators
o These are the individuals who file the articles of incorporation; not necessarily your future staff or board members.

Structure of the organization related to its membership
o If you form a formal membership organization where the members elect the board and approve major organizational decisions, you need to define the categories and levels of authority of your members.

• Provisions for distribution of its assets in case of dissolution
o If you form a public charity, your articles must clearly state that in case of dissolution the leftover assets will be distributed to another charity and may not inure to the benefit of a private individual or other non-charitable entity.

Incorporating a nonprofit organization can be a complex process, and seeking legal and financial guidance is highly recommended. Consulting with experts, such as attorneys and accountants with nonprofit experience, can help you navigate the legal and financial aspects effectively.

Sample articles of incorporation for a charity.