State of Vermont

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Office of the Secretary of State

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1. A Short Guide (below)
2. Title 11B V.S.A. "Vermont Nonprofit Corporation Act"
3. Forms
4. Sample Non-profit Corporation Bylaws with notes

A SHORT GUIDE TO THE VERMONT LAW
ON NON-PROFIT CORPORATIONS

        Creating a nonprofit corporation is a matter of legal forms and procedures. Filing articles of incorporation and fee with our office is the first step. Understanding the law is part of the responsibility of organizing and operating a nonprofit corporation.
        The law for the nonprofit corporation is a code, published in Title 11B of the Vermont Statutes Annotated. It constitutes an operating manual for the Vermont nonprofit corporation, as well as instructions on qualifying to do business in Vermont as a foreign nonprofit, created in another state or country.
        Beginning January 1, 1997, Vermont has a new code, and this guide is designed to give you basic information on how to satisfy the law. It cannot be comprehensive. For that, you should read the code. Here we answer basic questions about the process. For further information, you should consult a professional -- an accountant and/or an attorney.

        1. What is a nonprofit corporation?

        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.
        There are two types of nonprofits -- public benefit and mutual benefit corporations. A public benefit corporation is a traditional nonprofit, such as those organized to raise money for research or to promote a library, where the object is to promote a particular public benefit. The funds of such a corporation, if the corporation dissolves, must go to a nonprofit purpose, and not to the members or directors of the public benefit corporation. A mutual benefit corporation is formed for the benefit of its members, such as a golf club, where memberships may be bought and sold, and funds distributed to members upon dissolution.
        The Vermont Attorney General has a role in public benefit corporations. That office may take the corporation to court to protect its assets or ensure that it is operated in the public interest.

        2. How are nonprofit corporations formed?

        You must complete articles of incorporation and pay a $75.00 fee. A copy of the form is posted on our web site and also is available upon request from our office. The e-mail address is biz@sec.state.vt.us. Surface mail requests may be sent to Business Registry, Office of the Secretary of State, 109 State Street, Montpelier, Vermont 05609-1104. The phone number is 802-828-2386.

        3. What information is needed to complete the articles?

        You need the name and signature of an incorporator or incorporators, people who will sign their names to the initial articles of incorporation. One is enough, but assuming you will eventually have a board of directors, remember that incorporators often form the initial board of directors and may enact bylaws to get the corporation up and running. You also need a registered agent, who will agree to have his or her name given to accept service and other papers on behalf of the corporation. You need a name for your corporation. You need to state whether yours is a public benefit or mutual benefit corporation, although you do not need to state a purpose beyond that election.
        If you have made a mistake in filing articles, you may file corrective articles without having to start over again. The fee is $15.00.

        4. What is a proper name for a corporation?

        Any name will do, as long as it is distinguishable and not deceptively similar to or likely to be confused with another corporation or business name already registered with our office. It must include the word "corporation," "incorporated," "company," or "limited," or the abbreviation "corp.," "inc.," "co.," or "ltd." It cannot use the word "cooperative" or an abbreviation of that word.
        Avoid investing in signs, letterhead, or other emblems using a proposed name until your articles are accepted by our office. You may be disappointed not getting the first name you want. Sometimes applicants submit several names, as backups in case their initial request is denied.
        Nonprofit corporation names may be reserved to protect a name prior to organization, for a period of 120 days, and this reservation is renewable for two successive periods of 120 days. Names of foreign nonprofits may be registered annually to prevent some other company from using the name. There is no limitation on the number of renewals and no requirement to qualify to conduct business in Vermont. 11B V.S.A. § 4.02 & 4.03.

        5. Who can serve as a registered agent?

        Any Vermont resident or any legally registered corporation in Vermont may be designated as a registered agent. The agent does not have to be a member or director of the corporation. Each agent maintains a registered office within the state, but that office need not be the principal place of business of the corporation. It may be the agent's office.
        The agent accepts service for the corporation. If someone sues the corporation, the papers are delivered to the agent.
        Agents may resign at any time by giving written notice to our office.

        6. What about bylaws?

         Every nonprofit corporation needs bylaws. Usually they are adopted by the board of directors or incorporators, and they include details of governance, including the rights and duties of members, directors, and officers, details on meetings and elections, and directions on how critical decisions affecting the corporation are made.
        Model bylaws are posted on our web site and are available upon request from our Business Registry to use as a guide, but each corporation will want to fashion its own governance process, after considering the options.
        Bylaws are not filed with the our office. They are for the use of the corporation and ought to be read and understood by everyone involved. They should be kept up to date, using a proper amendment process.

        7. How does my corporation stay in good standing with the state?

        Your corporation may be revoked for (1) failing to pay fees within 60 days after they are due, (2) failing to file the biennial report with our office within 60 days after it is due, (3) being without a registered agent or registered office in Vermont for 60 days or more, or (4) failing to notify our office within 120 days that your registered agent or registered office has been changed, that your registered agent has resigned or is deceased, or that your registered office has been discontinued. Our Business Registry will send you a biennial report form in time for you to file, but should you not get the form, the obligation still is yours. If you fail to complete it on time, your corporation status will be revoked, but you can reinvigorate the corporation and any action taken during the period of revocation by filing the missing reports and paying a penalty of $25.00 for each year it is delinquent.

        8. What about tax exemption?

        Although you form a nonprofit corporation, you are not tax exempt for income tax purposes until you obtain a proper exemption from the IRS. Call your local IRS office for more details. You should also contact the IRS for a tax identification number for your corporation, whether you are seeking tax exempt status or not.
        Even without tax exempt status from the IRS, you may qualify for property tax exemption. Consult your local listers and perhaps a professional on this point.

        9. What rights do members have to information about the nonprofit corporation?

        If your nonprofit has members, they may inspect all financial and corporate records of the corporation upon request and for a proper purpose. The corporation may impose a reasonable charge for providing this information.

        10. What protection from liability does a director enjoy?

        Directors of tax exempt corporations are immune from liability in some cases under Vermont law. 12 V.S.A. § 5781. A corporation may also indemnify its directors by vote of the board of directors. 11B V.S.A. § 8.51. The corporation is required to notify all members of this decision in most cases. 11B V.S.A. § 16.21.

        12. What about foreign nonprofit corporations?

        Nonprofits formed in other states or countries may conduct business in Vermont by filing an application for a certificate of authority, along with a $100.00 fee. The law no longer requires the filing of a certified copy of articles from the state of origin; a certificate of existence or good standing from the filing officer of the home jurisdiction is sufficient.
        Each foreign nonprofit must maintain a resident agent for service of process as well.

        13. What other services does the Business Registry offer?

         Sometimes you need something official to show you are a validly formed and vital nonprofit corporation. You may request a certificate of good standing from our Business Registry. The fee is $5. You may want copies of your file, which are also available upon request. You can learn basic information about other nonprofits, as well as for-profit corporations and other businesses. Our Business Registry is there to help. E-mail us at biz@sec.state.vt.us or give us a call for answers to your filing questions.