How to Start a Nonprofit Organization in Virginia
How to Start a Nonprofit Organization in Virginia
Starting a nonprofit in Virginia isn’t one process — it’s two running in parallel. You incorporate with the state (Virginia SCC, $75) and apply for federal tax-exempt status with the IRS (Form 1023 or 1023-EZ, $275–$600). Do both right, and you end up with a legally formed Virginia corporation that the IRS recognizes as tax-exempt under 501(c)(3). Miss a step or get the paperwork wrong, and you’re either stuck in IRS limbo or paying taxes you didn’t plan for.
There’s also a third track most people don’t know about until someone tells them: charitable solicitation registration with VDACS, required before you ask anyone in Virginia for a donation.
Here’s how all of it works.
State Incorporation: Forming Your Nonstock Corporation
Virginia doesn’t use the term “nonprofit corporation” in its statutes. What you’re actually forming is a nonstock corporation — a corporation without stock or shareholders. Same concept, different label. File the wrong form and you’ll have to start over.
File Articles of Incorporation with the Virginia SCC
The filing fee is $75. You file Articles of Incorporation for a nonstock corporation with the Virginia State Corporation Commission (SCC), either online through their Clerk’s Information System (CIS) at cis.scc.virginia.gov or by mail to the SCC’s Richmond office. Online is faster. Mail can add weeks.
When the SCC accepts your filing, they issue a certificate of incorporation. That’s your proof that the corporation legally exists in Virginia. No certificate, no corporation.
The Members vs. No-Members Decision
This is the detail that trips people up. Virginia law requires your Articles of Incorporation to state explicitly whether the corporation will have members — people with voting rights, similar in concept to shareholders in a for-profit corporation.
You have two options:
With members: Members typically vote on major decisions — electing directors, approving amendments to bylaws, dissolving the organization. Common for membership associations, alumni groups, professional societies.
Without members: The board of directors runs everything. More common for public charities, foundations, and service organizations where the public benefits but doesn’t govern.
Neither structure is better in the abstract. But you have to choose now, in the Articles, because changing it later requires amending your formation documents and potentially your bylaws. Think through your governance model before you file.
501(c)(3) Language Is Required in the Articles
If you want federal tax-exempt status — and you almost certainly do — your Articles of Incorporation need to include specific language that the IRS requires. Specifically, you need:
A purpose clause that limits the corporation’s activities to one or more exempt purposes (charitable, educational, religious, scientific, literary, etc.).
A dissolution clause that says if the organization dissolves, its assets go to another 501(c)(3) organization or to the federal, state, or local government — not to directors, officers, or founders.
These clauses must appear in the Articles themselves, not just the bylaws. The IRS has published sample language in its instructions for Form 1023. Use it verbatim or have an attorney adapt it. Don’t improvise.
If you file your Articles without this language and then apply for 501(c)(3) status, the IRS will ask you to amend your Articles — which means going back to the SCC and paying another fee. Get it right the first time.
IRS 501(c)(3) Tax-Exempt Status
Virginia incorporation gives you a legal entity. It does not make you tax-exempt. That requires a separate application with the IRS.
Form 1023 vs. Form 1023-EZ
You have two paths:
Form 1023 (full application): The comprehensive version. Filing fee is $600. You describe your organization’s activities, finances, governance structure, and programs in detail. The IRS typically takes 6–12 months to process a full 1023. For larger organizations, those with complicated activities, or those expecting significant funding, this is the right path.
Form 1023-EZ (streamlined application): Shorter, faster, cheaper. Filing fee is $275. Processing time is typically 3–6 months — sometimes faster. But there are eligibility requirements. Your organization must have projected annual gross receipts under $50,000 for the next three years and total assets under $250,000. Certain types of organizations (churches, schools, hospitals, supporting organizations) aren’t eligible regardless of size.
Before you assume you qualify for 1023-EZ, complete the eligibility worksheet in the instructions. It’s about 30 questions and takes 15 minutes. If you don’t qualify, you’re filing the full 1023.
Both forms are filed online through Pay.gov. The IRS no longer accepts paper 1023 applications.
What the IRS Is Looking For
The 501(c)(3) determination letter is what donors, grant-makers, and government agencies want to see before they give you money. It confirms your tax-exempt status. Donations to your organization become tax-deductible for the donor only after you have this letter (though exemption is retroactive to your incorporation date if you apply within 27 months of forming).
The IRS is evaluating whether your organization:
- Has a legitimate exempt purpose
- Operates for public benefit, not private benefit
- Has governance structures that prevent self-dealing
- Has Articles that include the required clauses (see above)
Your Articles need to be in order before you apply. The IRS will ask for a copy.
Charitable Solicitation Registration with VDACS
Here’s the step most new nonprofits skip until they’re already in trouble. If you plan to solicit charitable contributions in Virginia — through fundraising events, direct mail, email campaigns, crowdfunding, or any other method — Virginia law requires you to register with the Virginia Department of Agriculture and Consumer Services (VDACS) before you start asking.
Registration is handled through VDACS’s Office of Charitable and Regulatory Programs (OCRP). You can find information and registration links at their website, and questions can be directed to [email protected] or (804) 786-1343.
Registration must be renewed annually. You file financial disclosures showing how donations are being used — this is the transparency mechanism Virginia uses to protect donors.
Exemptions
Not every nonprofit has to register. Virginia exempts:
- Religious organizations soliciting primarily from their own membership
- Educational institutions accredited by a recognized accrediting body
- Organizations that raise less than $5,000 per year from the public (not counting contributions from members, officers, or directors)
- Organizations soliciting only from their own membership
If you’re a small startup that hasn’t done any public fundraising yet, you might qualify for the small-organization exemption in the early months. But once you cross $5,000 in public donations or start a public campaign, you need to be registered. Don’t wait until you’re already soliciting.
Professional Fundraisers
If you hire a professional fundraiser or fundraising counsel to solicit on your behalf in Virginia, they must be separately registered with VDACS. This isn’t your obligation as the nonprofit, but you should confirm any fundraising firm you hire is registered before signing a contract. Unregistered solicitors create problems for the organizations they work with.
Ongoing Compliance
Formation is a one-time event. Compliance is permanent. Here’s what you’re signing up for.
Annual SCC Registration Fee
Virginia nonstock corporations pay a $25 annual registration fee to the SCC. That’s genuinely cheap — one of the more affordable ongoing state fees you’ll find anywhere. File through the SCC’s CIS portal by the due date or you’ll face reinstatement issues.
IRS Annual Reporting (Form 990)
Every 501(c)(3) must file an annual information return with the IRS, regardless of whether you owe taxes. Which form depends on your size:
- Form 990-N (e-Postcard): Gross receipts ≤ $50,000. Takes about 10 minutes to file online. No financial detail required.
- Form 990-EZ: Gross receipts between $50,000 and $200,000, and total assets under $500,000.
- Form 990 (full): Gross receipts ≥ $200,000 or total assets ≥ $500,000.
Miss three consecutive years of 990 filing and the IRS automatically revokes your tax-exempt status. This happens more often than you’d think, especially with small volunteer-run organizations that assume “we didn’t raise much, we don’t have to file.” You always have to file. Automatic revocation requires a reinstatement application and a fee to fix.
Virginia Income Tax Exemption
Federal 501(c)(3) status does not automatically exempt you from Virginia income tax. You need to apply separately with the Virginia Department of Taxation for a Virginia income tax exemption. The application is straightforward once you have your IRS determination letter in hand — the letter is the key piece of evidence. Apply promptly once you receive it.
Note that Virginia income tax exemption doesn’t cover sales tax. Most nonprofits are not exempt from Virginia sales tax by default. There are specific exemptions for certain types of organizations (nonprofit churches, nonprofit hospitals, some others), but the general rule is that nonprofits pay Virginia sales tax unless they qualify for a specific statutory exemption. Check with the Department of Taxation or an accountant before assuming you’re covered.
Board Governance
Virginia law requires nonstock corporations to have a board of directors. Your bylaws (which you create — they don’t get filed with the SCC) should specify:
- How many directors you have and their terms
- How directors are elected or appointed
- Meeting frequency and quorum requirements
- Officer roles and responsibilities
Hold your board meetings. Keep minutes. This isn’t bureaucratic box-checking — it’s legal protection. If your organization ever faces a legal challenge, a lawsuit, or an IRS audit, documented governance is what establishes that you’re running a real organization with proper oversight.
Financial Recordkeeping
Nonprofits are required to maintain financial records that accurately reflect income, expenses, assets, and liabilities. For organizations receiving grants or government funding, this usually means keeping records for at least 3–7 years depending on the funding source.
Transparency matters here beyond just legal compliance. Many grant-makers and major donors will ask to see your financials before committing money. Organizations with Form 990 filings available through ProPublica’s Nonprofit Explorer or GuideStar (now Candid) are easier to fund. Your 990 is a public document — file it accurately and treat it as a communication to potential supporters, not just an IRS obligation.
Startup Costs
Here’s what you’re actually spending to get a Virginia nonprofit off the ground:
| Item | Cost |
|---|---|
| SCC Nonstock Corporation Articles of Incorporation | $75 |
| IRS Form 1023-EZ (streamlined application) | $275 |
| IRS Form 1023 (full application) | $600 |
| VDACS charitable solicitation registration | Varies by organization |
| Attorney fees (optional) | $1,000–$5,000 |
DIY lean startup: $350–$1,000. That covers SCC incorporation ($75) plus whichever IRS form applies ($275 or $600), plus any incidentals. If you’re disciplined with the paperwork and your organization’s activities are straightforward, this is achievable.
With an attorney: $1,500–$6,000. A nonprofit attorney drafts your Articles with correct 501(c)(3) language, drafts your bylaws, and often helps prepare or review your IRS application. For organizations with complex governance, multiple programs, or that expect significant grant funding early on, the attorney cost pays for itself quickly. A botched IRS application that gets rejected means refiling, delays, and potentially losing early donors or grants while you wait.
The $275 vs. $600 IRS decision is worth thinking through carefully. If you qualify for 1023-EZ, it saves you $325 and months of processing time. But if your organization grows quickly, you may wish you’d filed the full 1023, which includes more detailed information that can actually help you communicate your mission to funders. There’s no wrong answer — just be honest about your eligibility.
The Sequence That Actually Works
Start with your Articles — get the language right before filing anything. Then:
- File Nonstock Corporation Articles with the SCC ($75, online at cis.scc.virginia.gov)
- Obtain your EIN from the IRS (free at irs.gov/ein — do this before the 1023 application)
- Draft your bylaws and hold your first board meeting
- File Form 1023 or 1023-EZ with the IRS ($275 or $600)
- Register with VDACS for charitable solicitation (before any public fundraising)
- Apply to Virginia Department of Taxation for state income tax exemption once you have your IRS determination letter
The SCC help line is available at (804) 371-9733 or toll-free at (866) 722-2551 if you have questions about your state filing. For VDACS questions on charitable solicitation, contact [email protected] or (804) 786-1343.
The IRS determination letter is the finish line most people are aiming for. Budget the time honestly — 3 months minimum if you qualify for 1023-EZ, up to a year for the full application. Start the process before you need the letter, not after.