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A Step-By-Step Reference Guide To Creating A 501(C)3

A Step-By-Step Reference Guide To Creating A 501(C)3. Holly West, MS, MPM Rhonda Woolum, RN Erin Schaffner, BS. What is a 501(C)3? And why do I need one?. A 501(C)3 is a type of corporation recognized by the federal government as an organization whose

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A Step-By-Step Reference Guide To Creating A 501(C)3

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  1. A Step-By-Step Reference Guide To Creating A 501(C)3 Holly West, MS, MPM Rhonda Woolum, RN Erin Schaffner, BS

  2. What is a 501(C)3? And why do I need one? A 501(C)3 is a type of corporation recognized by the federal government as an organization whose general purpose is educational, religious or charitable. Local Health Departments operate as non-profit organizations but are ineligible for IRS 501(C)3 status because they receive a substantial portion of their operating funds from the state. Local Health Departments who develop a separate non- profit charity with 501(C)3 status will increase access to to grant funding by as much as 90%. For tax deduction purposes and legal processes, most foundations require applicants to obtain 501(C)3 status to be eligible for grant funding. This restriction on financial support severely limits funding opportunities available to public health departments. In addition, 501(C)3 organizations have increased ability to fundraise as a means to increase financial support.

  3. Things To Consider Before Beginning The Process… • The process of developing a “501(C)3” is daunting. Organizations can expect to spend countless hours, days, weeks, months and possibly years completing all necessary components before actually receiving IRS 501(C)3 determination. • The cost of developing a “501(C)3” is also a concern. Most applicants can expect to pay a one-time user fee of $750 to the IRS for consideration of their application. Organizations, however, who do not expect their gross receipts to exceed $10,000 annually may pay a reduced fee of $300. • Most importantly each individual health department should evaluate their need before embarking on this process. It is not always necessary to develop a 501(C)3 as a means to increase funding. Health departments should explore their financial options wisely, creating a separate non-profit entity requires a lot of extra work both during and after the filing process.

  4. If 501(C)3 Status Is In Your Future…. • If you are still set on developing a “501(C)3” here are some options to consider: • Look within you community for helpcreating your charity. Financial and legal advice/assistance can speed up the filing process by months! If you decide the “do it yourself” method you can refer to: http://www.form1023help.com/ or try purchasing Susan Deja’s book, “Preparing Your Own 501(C)3 Application.” • Consider collaborating with other health departments or community health agencies to reduce the overall filing costs. Ten health departments partnered together to establish “Eastern Kentucky Public Health Inc.”and was able to reduce individual filing fees below $100.

  5. So I’ve Decided To Create A 501(C)3…..Now What? • The first step in establishing a “501(C)3” is to gain community support for your organization and form an initial board of directors. For filing purposes at least 3 individuals are required to begin the process. • Next, you will need to choose a name for you corporation and contact the Kentucky Office of the Secretary of State to confirm name availability. You can conduct your own name availability search online at: http://apps.sos.ky.gov/business/obdb/(S(1ahiwo55wlqcuy55z255mo2j))/nameavail.aspx • Once you have confirmation that your business name is available you will need to complete the Kentucky Articles of Incorporation paperwork for a Non-Profit Corporation. This form can also be obtained online at the Kentucky Office of the Secretary of State website or can be found in the Appendices. An $8.00 filing fee is also required with the application. NOTE: A MORE FORMAL ARTICLES OF INCORPORATION IS REQUIRED WITH YOUR IRS 1023 APPLICATION!!

  6. So I’ve Decided To Create A 501(C)3…..CONTINUED • All federally recognized businesses must obtain an Employer Identification Number (EIN) from the IRS. An EIN is required for all 501(C)3 applications regardless of whether your corporation has employees. To obtain an EIN contact the IRS Business & Specialty Tax Line at (800) 829-4933 or visit their webpage at http://www.irs.gov/businesses/small/article/0,,id=97860,00.html. Refer to Appendices for the formal document. (All previous steps must be completed prior to applying for an EIN).

  7. Drafting Formal Articles of Incorporation… • Articles of Incorporation (AOI) are an official statement of creation of an organization. AOI’s are important to protect both the board and members of the organization from legal liabilities incurred by the organization. AOI’s make the corporation the holder of debts and liabilities, not the individuals and officers affiliated with the organization. A generic outline for the contents of the AOI for a non-profit corporation is as follows: ARTICLE 1: The name of the corporation ARTICLE 2: The name and address of the registered agent of the corporation. ARTICLE 3: The purpose(s) for which the corporation is being formed. ARTICLE 4: A statement of the number of initial directors and their names and addresses. ARTICLE 5: A statement defining the period of existence of the corporation. If it is indefinite– it would be defined perpetual. ARTICLE 6: A statement detailing the provisions for membership. ARTICLE 7: A statement of the exemption requirements ARTICLE 8: Contact information for all incorporators.

  8. Drafting Bylaws… “An organization’s success depends in large part on how well it goes about establishing its structures and methods for making decisions…” BYLAWS— (A generic outline) • What is the name of the organization? • What is the purpose or mission of the organization? • What kind of corporate structure will be established? • Membership • Officers • Board of Directors • Meetings • Contracts, loans, checks and deposits • Miscellaneous Provisions A sample draft of Eastern Kentucky Public Health Inc’s Bylaws can be found in the Appendices.

  9. Completing Tax Form 1023 • Form 1023 is the official Application for Recognition of Exemption Under Section 501(C)3 of the Internal Revenue Code. Form 1023 is complex and frightens many potential applicants away with one glance. Many self-help manuals, however, like the one by Susan Deja, are available and should be utilized by those who are unfamiliar with the document. • For additional information you can call the IRS Exempt Organizations Customer Account Services toll-free at 1-877-829-5000. Both form 1023 and instructions can be found in the Appendices

  10. Almost There… • Once you have chosen an available name for your organization, received confirmation of your EIN from the IRS, filed AOI paperwork with the state, drafted formal AOI and Bylaws and completed form 1023 you can relax…for awhile. The waiting process for 501(c)3 determination can be lengthy. You can expect to wait anywhere from 6 weeks to 12 months depending on the accuracy of your application and the number of applications waiting to be reviewed. • In the meantime you can begin more formal strategic planning for your organization. Some foundations will even allow you to apply for grants once you have submitted your 501(C)3 application. • Finally, give yourself a pat on the back. You deserve it and you know it!!! Good luck with your application. Statistics show that the majority of all applicants are approved!

  11. BYLAWS OF EASTERN KENTUCKY PUBLIC HEALTH INC. Article 1. NAME 1.1Name. The name of the organization shall be Eastern Kentucky Public Health, Inc. (“CORPORATION”) and shall operate as a non-profit, non-stock Corporation. Article II. PURPOSE 2.1 Purpose. To operate as a charitable organization organized exclusively for charitable, educational, and scientific purpose, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under 501(c)3 of the Internal Revenue Code, and to solicit, receive, and manage contributions from individuals, businesses, and organizations made for the above purposes. 2.2 Propaganda. The CORPORATION shall not carry on propaganda or otherwise attempt to influence legislation and shall not participate in any political campaign on behalf or in opposition to any candidate for public office. Article III. NO CAPITAL SHARES 3.1 No Capital Shares. The CORPORATION shall have no capital shares or shareholders, and its business and affairs shall not be conducted for private pecuniary gain or profit, nor shall any of the CORPORATION’s gain profit or property inure to incorporators thereof, nor any officer or director thereof, but the CORPORATION’s entire gain, profit, net earnings and property shall be devoted exclusively to the charitable and other uses and purposes set out in Article II of these Bylaws. 3.2 Compensation. The CORPORATION shall be authorized to pay reasonable compensation for services rendered to any third-party individual and/or Corporation. 3.3 Loans. No loans shall be made by the CORPORATION to its officer or Directors

  12. Article IV. MEMBERSHIP 4.1 Qualification of Members. Membership will be open to all interested parties residing in the Eastern Kentucky counties of: Boyd, Carter, Elliot, Floyd, Greenup, Johnson, Lawrence, Lewis, Magoffin and Pike. Article V. OFFICERS 5.1 Number. The officers of the CORPORATION shall be a President, a Vice-President, a Secretary and a Treasurer. Additional officers and assistant officers may be deemed necessary, may be elected or appointed by a majority vote of the current directors. 5.2 Appointment. The President, Vice-President, Secretary, and Treasurer will be approved by the general membership after being selected by the current Board of Directors at the first annual meeting of the calendar year. 5.3 Term. The officers of the CORPORATION shall be elected annually. Each officer shall hold office until his successor has been duly elected and shall have qualified or until his death, resignation, or removal in a manner provided within these bylaws. 5.4 Duties of the President. a. The President shall be the chief executive officer of the organization; he/she shall preside at all meetings of the members of the Board of Directors, he/she shall have general and active management of the affairs of the CORPORATION, shall see that all orders and resolutions of the Board of Directors are carried into effect, subject, however, to the right of the Directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officers of the organization. b. The President shall be responsible for calling all regular and special meetings of the Board. c. The President shall be responsible for giving guidance to all activities of the CORPORATION.

  13. d. The name of the President shall be one of the names on the signature card at the bank and shall have the authority to sign checks for the CORPORATION. The President may appoint committees as needed and membership of said committees shall be ratified by the Board of Directors. 5.5 Duties of the Vice President. a. The Vice-President shall act in all cases for and as the President in the latter’s absence, incapacity, or at the President’s request, and shall perform such other duties as he may be required to do from time to time. b. The Vice-President shall be responsible for call all regular and special meetings of the Board. c. Should an elected office be vacated, the Vice-President shall assume the corresponding duties until a new officer is elected. 5.6 Duties of the Secretary. a. Keep the minutes of the meetings of the Board in one or more books provided for that purpose, see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law, accept notification of proxies from Board. b. Be custodian of the corporate records and of the seal, if any, of CORPORATION, be responsible for authenticating records of CORPORATION, keep a register of the contact information for each member of the Board; and in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Chairman of the Board, the President or the Board. 5.7 Duties of the Treasurer. a.The Treasurer will have custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the CORPORATION, and shall keep the monies of the CORPORATION in a separate account to the credit of the CORPORATION.

  14. b. The Treasurer shall disburse funds of the CORPORATION as may be ordered by the Board of Directors, taking proper vouchers for such disbursement, and shall render to the President and Directors, at the regular meetings of the Board, or whenever they may require it, an account of all transactions as Treasurer and of the financial condition of the organization. Article VI. BOARD OF DIRECTORS 6.1 Number and Composition of Board of Directors. The number of directors of the CORPORATION shall not be less than one nor more than twelve. Each director shall hold office until the next annual election and until his successor has been elected and qualified. The composition of the Board of Directors shall initially consist of the elected officers including the President, Vice-President, Secretary, Treasurer and four members at large, for a total of eight members. 6.2 Organization Management. The business and affairs of the CORPORATION shall be managed by its Board of Directors, as may be chosen from time to time. The Directors must meet the eligible membership requirements of the organization. 6.3 Two-Thirds Majority Rule. A two-thirds majority of Directors in office shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the Directors present at the meeting at which a quorum is present shall be acts of the Board of Directors. 6.4 Voting Rights. Each Director shall have one vote. 6.5 Vacant Director Seat. Should the seat of director be vacated for any reason, the Board may name a replacement by the vote of majority of directors then in office. 6.6 Succession of Power. The line of responsibility shall be defined as President, Vice-President, Secretary, Treasurer, and general Directors.

  15. 6.7 Emergency Quorum. The quorum shall be suspended in case of an emergency, as deemed such by at least two officers and at least one other Director. The Directors so acting shall make a good faith attempt to give notice to all other Directors. Any vote taken under such circumstances shall require the unanimity of those members of the board present at the time. 6.8 Committees. The board, by resolution, may designate from among its members an executive committee and any other committees, each consisting of at least one director and/or member and additional member of the CORPORATION. 6.9 Attendance Requirement and Proxy. Board members are expected to attend each regular Board meeting. If a Board member anticipates having to miss a regular meeting, he or she shall have another Board member, serve as Proxy at the Board meeting. Notice of Proxy shall be given prior to the meeting to the Secretary. 6.10 Removal and Resignation. Any member of the Board may be removed, with or without cause, by an affirmative vote of 2/3 of the Board or by operation of these bylaws. Any member of the board may resign from the Board at any time by giving thirty (30) days written notice to the Board. 6.11 Vacancies. In the event a vacancy in the Board caused by the resignation of a current Board member or the normal rotation of directors into an officer’s role, the current Board will review potential candidates for membership on the board and present a recommendation to the board for approval. 6.12 Contract Rights of the Board. Election or appointment of a director, officer or agent shall not affect that individual’s contract rights, if any, with CORPORATION. The resignation of a director, officer or agent shall not affect CORPORATION’s contract rights, if any, with the officer.

  16. 6.13 Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the directors. 6.14 Compensation. No compensation shall be paid to directors, as such, for their services as a director. Nothing herein contained shall be construed to preclude any director from serving the CORPORATION in any other capacity and receiving compensation therefore. Article VII. MEETINGS 7.1 Meetings of the Board. Regular meetings of the board shall be held at least two times \ per year and shall be set by the Board for the purpose of transacting such business as may come before the meeting. The date, time and place of all meetings of the Board shall be designed by the President, at the first meeting following election of the officers each year. Such date, time and place may be changed upon at least 48 hours written notice by personal delivery, mail, fax, or electronic mail to each of the Directors. The first meeting of the Board shall occur in January of each calendar year for the purpose of electing officers. The second meeting shall occur approximately six months thereafter. 7.2 Special Meetings. Special meetings of the Board may be called, by or at the request of, the President or any five directors of the CORPORATION. Notice of the date, time and manner of any special meeting shall be given at least 48 hours prior thereto by written notice faxed, electronically mailed, or delivered personally to each Board Member. Special meetings of the Board may be held at any such place as many be specified in the notice of the meeting, via telephone conference call, or via other electronic means, provided that all Board members are given the opportunity to participate, and shall not be excluded for any reason if such desire to participate is expressed. If such meeting is conducted via electronic means, the meeting shall be considered to commence at the time of transmittal by the party initiating the special meeting, and shall be considered adjourned by the end of business two days following commencement of such meeting. Business that is conducted at a special meeting via conference call or electronic means is only valid if each and every Board member has cast an affirmative or negative vote, or proactively enters an abstention to the record, in written form, as set forth in these Bylaws.

  17. 7.3 Quorum and Voting. Unless the Articles require a greater or lesser number, a two-thirds majority of the number of directors elected shall constitute a quorum of the Board; provided, however, that if less than a two-thirds majority of the directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. 7.4 Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if the text of the resolution of matter agreed upon is sent to all of the Directors in office all the Directors in office consent to such action in writing setting forth the action taken. Consent will be deemed granted upon receipt of written notice to such to the President or Executive Director by the date and time specified in the request for action. Email and faxed consents shall also fit the definition of “written notice.” Such consent in writing shall have the same force and effect as a vote of the Board at a meeting and may be described as such in any document executed by CORPORATION. Article VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS 8.1 Contracts.The Board may authorize any officer or agent to enter into any contact negotiations and deliver any instruments in the name of and on behalf of CORPORATION. Such authority may be general or confined to specific instances. In any case, all contracts over the amount of $500.00 much be executed only upon Board approval. No Board Member can enter any contract individually. 8.2 Corporate Loans. No loans shall be contracted on behalf of CORPORATION, and no evidences of indebtedness shall be issued in CORPORATION’s name, unless authorized by a resolution of the Board. Such authority may be general or confined to specific instances. Only officers with official financial signatory authority as set forth in these Bylaws, or by resolution of the Board may execute these documents on behalf of CORPORATION. Such agreements shall only be entered into upon Board approval. 8.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences or indebtedness issued in the name of CORPORATION shall be signed by such officer or agent of CORPORATION and in such manner as shall, from time to time, be determined by resolution of the Board, and in accordance with these bylaws.

  18. 8.4 Deposits. All funds of CORPORATION not otherwise employed shall be deposited, from time to time, to the credit of CORPORATION in such banks, trust companies and other depositories as the Board may select. Article IX. MISCELLANEOUS PROVISIONS 9.1 Construction. Unless the context specifically requires otherwise, any reference in these Bylaws to any gender shall include all other genders, any reference to the singular shall include the plural and any reference to the plural shall include the singular. 9.2 Limitations. Notwithstanding any other provision hereof, including, but not limited to, any provision of its Bylaws, CORPORATION shall take no action contrary to the provisions of any laws or regulations governing the entity. 9.3 Severability or Provisions. If any provision of these Bylaws, or its application to any person or circumstances, is held invalid or unenforceable by a court of competent jurisdiction the remainder of these Bylaws, or the application of such provisions to persons or circumstances other than those to which it was held to be invalid or unenforceable, shall not be affected thereby, and to this extent, the provisions of these Bylaws are severable 9.4 Amendments to these Bylaws. These Bylaws may only be amended by affirmative vote of 2/3 of the Board, at a regular meeting, after having at least thirty (30) days to review the amendments. Any and all amendments shall be made in accordance with all federal, state and local laws and regulations, and provisions set forth in the CORPORATION Bylaws. 9.5 Indemnity. To the full extent permitted by the laws of the Commonwealth of Kentucky, the CORPORATION shall indemnify its Directors, Officers, and Members for, and hold the same harmless from, any loss or damage incurred by them by reason of any act or omission so performed or omitted by them (and not involving fraud, bad faith or gross negligence). To the full extent authorized or permitted by the Act, the CORPORATION shall pay or reimburse reasonable expenses (including reasonable attorneys' fees) incurred by them in a proceeding in advance of final disposition of such proceeding, provided they agree, in such form as the other Directors, Officers, and/or Members, respectively shall request, to reimburse the

  19. CORPORATION if it is ultimately determined that the Directors, Officers, and/or Members did not meet the standard for indemnification set forth in this section. The CORPORATION may purchase and maintain insurance on behalf of the Directors, Officers, and/or Members against any liability asserted against or incurred by a Directors, Officers, and/or Members as a result of being a Directors, Officers, and/or Members, whether or not the CORPORATION would have the power to indemnify such person against the same liability under the provisions of this section or the laws of the Commonwealth of Kentucky. 9.6 Notifications. All Notices required or permitted under this Agreement must be in writing and delivered personally against a written receipt, sent by reputable messenger service (such as Federal Express, UPS, etc.) for overnight delivery, transmitted by confirmed telephonic facsimile (fax), sent by certified, express, or registered mail, postage prepaid, return receipt requested, or sent via electronic mail. A Notice to the Company must be addressed to the Company at the Company's principal office. Any party may designate, by notice to all of the others, substitute addresses or addressees for Notices, and thereafter Notices are to be directed to those substitute addresses or addressees. 9.7 Complete Agreement. This Agreement constitutes the complete and exclusive statement of the agreement among the Directors, Officers, and Members. It supersedes all prior written and oral statements, including any prior representation, statement, condition, or warranty. 9.8 Applicable Law. All questions concerning the construction, validity, and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal law, not the law of conflicts, of the Commonwealth of Kentucky. 9.9 Section Titles; Section References. The headings herein are inserted as a matter of convenience only, and do not define, limit, or describe the scope of this Agreement or the intent of the provisions hereof. All references herein to Sections shall refer to Sections of this Agreement unless the context clearly requires otherwise. 9.10 Binding Provisions. This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective executors, administrators, heirs, successors, and permitted assigns.

  20. 9.11 Counterparts. This Agreement may be executed simultaneously in two or more counterparts each of which shall be deemed an original, and all of which, when taken together, constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. The above Bylaws were adopted by the Eastern Kentucky Public Health, Inc. Board of Directors effective as of ________________, 2009 _________________________________ Director _________________________________ Director _________________________________ Director _________________________________ Director _________________________________ Director _________________________________ Director __________________________________ Director __________________________________ Director

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