CHAPTER 2 | AFFILIATE START-UP PROCESS + REQUIREMENTS

I. FORMATION PROCEDURES + DOCUMENTS

  • Establish a Board
  • Develop and Approve By-laws
  • File Articles of Incorporation
  • Obtain Federal Employment Identification Number
  • Execute Affiliate Agreement
  • Obtain Tax Exemption as a 501(c)(3) Nonprofit
  • Register in State as a Charitable Organization
  • Obtain Sales Tax Exemption
  • Review Insurance Coverage

II. INITIAL OPERATIONAL STEPS

  • Start-up Checklist
  • Affiliate Webpage
  • Board of Directors
  • Mentors
  • Students

III. SAMPLE LETTER OF INCLUSION

The proper establishment of an ACE affiliate requires adherence to Federal and state laws and regulations as well as to ACE National policies.  Start-up affiliates are strongly advised to secure the services of an attorney and accountant to help in this process.  ACE Regional Directors are also available to offer guidance and assistance of a non-legal nature.

 

States have slightly different requirements for creating a nonprofit organization.  Most state governments publish on their websites explanations of these requirements.  Start-up information by state can also be located at Grantspace.org. Alternatively, a Google search for “setting up a nonprofit in [state name]” will often turn up the appropriate document. Leaders of new affiliates may wish to familiarize themselves with this information in addition to obtaining professional advice.

 

This chapter details the formal requirements to establish an affiliate and reviews some of the preliminary operational steps.

I. FORMATION PROCEDURES + DOCUMENTS

Individuals or groups wishing to start an ACE affiliate should complete nine steps in the order listed below.

1. Create a Board

The Board of Directors is an affiliate’s governing body.  To be effective and exercise proper oversight, Board members need to have a clear understanding of ACE’s mission, objectives, and activities. At a minimum, the Board should have five (5) members including representatives from sponsor companies and organizations as well as a CPA and legal professional. The By-laws should clearly establish the procedure for appointing or electing Board members as well as define their terms of service.

A list of Board members with their company affiliations should be sent to the prospective affiliate’s Regional Director.

2. Develop and Approve By-laws

By-laws describe and govern the operation of an affiliate.  They should detail the Board’s structure, including any committees, and set forth the Board’s rules of operation.  A sample set of ACE By-laws can be viewed here.

The Board must formally adopt its By-laws.  A signed and dated copy of this document must be emailed to the affiliate’s Regional Director.   The affiliate should retain a copy of its By-laws and be prepared to make a copy available upon the request of any individual or entity.

As a matter of good governance, affiliates should review their By-laws at least every three years and make any needed amendments.  Send scanned files of any amended and properly dated set of By-laws to an ACE Regional Director.

A list of Board members with their company affiliations should be sent to the prospective affiliate’s Regional Director.

3. File Articles of Incorporation

The affiliate must incorporate itself in its home state as The ACE Mentor Program of [insert state or city name]. The name should be discussed with a Regional Director and needs to define the affiliate’s intended area of operation.

The Articles of Incorporation must be filed with the appropriate state and/or local government agency, and a scanned copy emailed to the affiliate’s Regional Director.  Because each state has different requirements and steps for incorporation, the ACE National Office highly recommends that an affiliate seek professional legal advice.  Some states require a hard copy of the Articles of Incorporation.  See this sample Articles of Incorporation.

4. Obtain Federal Employment Identification Number (EIN)

An affiliate must obtain a Federal Employer Identification Number (EIN) by filing a Federal Form SS-4, “Application for Employer Identification Number,” with the Internal Revenue Service. The process is quick and simple.

  • An online submission can be made at this section of the IRS website.
  • A PDF copy can be saved with the online application.
  • If an affiliate files a paper copy of the SS-4 as opposed to filing online, the IRS will mail the affiliate a letter with the EIN. Filing electronically is strongly recommended, however.
  • Online submissions receive an online acceptance which should be saved as a PDF file and retained for record-keeping purposes. In addition, an affiliate should email the PDF file to its Regional Director.

5. Execute Affiliate Agreement

Each affiliate must execute an Affiliate Agreement at its formation. This document defines the formal relationship between ACE Mentor Program of America and the affiliate, as well as the rights and responsibilities of each entity.  The Agreement clearly delineates expectations for an affiliate to be in full compliance with ACE National’s requirements.  (For a full discussion of compliance see Chapter 3 | Affiliate Compliance.)

The chair of the affiliate Board or other appropriate officer must sign and date the Agreement and submit it to the affiliate’s Regional Director who will transmit it to the National Office.  Once the ACE President signs the Agreement, the affiliate is authorized to begin operations and to take advantage of certain benefits provided by ACE National  (e.g., liability insurance).  The National office will provide the affiliate a copy of the signed Agreement for its records.

An affiliate’s responsibilities outlined in the Affiliate Agreement are summarized below:

ORGANIZATION

  • Organize affiliate as a charitable and educational nonprofit.
  • With the assistance of a legal professional, draft the affiliate’s Articles of Incorporation, By-laws, resolutions and any other necessary documentation and file these documents with appropriate state and local government offices as required by state regulations.
  • Define the affiliate’s territory.
  • With the assistance of accounting and legal professionals, complete all necessary Federal, state, and local registrations and filings required of a charitable, educational, tax-exempt nonprofit corporation.

 

DOCUMENTS

  • With the advice of legal counsel, adapt the sample Articles of Incorporation and By-laws to comply with applicable state and local laws.
  • Provide the ACE National Office with final executed copies of the following:
    • Affiliate Agreement
    • Articles of Incorporation
    • By-laws (signed and dated)
    • Confirmation of registration with an affiliate’s state charitable unit/department
    • Confirmation (either a PDF file or hard copy) received from the IRS with the affiliate’s Employer Identification Number (EIN).

6. Obtain Tax Exemption as a 501(c)(3) Nonprofit

Affiliates are eligible for inclusion under ACE’s national umbrella for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.  An affiliate should not file separately for its own nonprofit tax exemption.

For an affiliate to be included in the ACE’s group exemption as a 501(c)(3) nonprofit, the affiliate must send the National Office, through the appropriate Regional Director, a signed statement that it agrees to be included in ACE’s group exemption.  A sample statement can be viewed here.

For an affiliate to comply with IRS requirements for inclusion under ACE’s group exemption, the National Office must first have the following documents on file:

  • Affiliation Agreement
  • Articles of Incorporation
  • By-laws
  • A copy of the IRS acceptance form indicating the affiliate’s Employment Identification Number (EIN)
  • The affiliate’s legal address.
  • A list of the affiliate’s Board members.

Once the ACE National Office receives the signed statement requesting inclusion under ACE’s group exemption, it will forward the affiliate the group exemption number that must be included on an affiliate’s annual Federal tax returns. In general, if an affiliate has revenues exceeding $50,000, it must file IRS Form 990 annually. If an affiliate’s revenues are less than $50,000, it must file a Form 990N (an e-postcard). An affiliate may also need to file a state tax return. (See Chapter 7 | Financial Management, for more details about taxes.)

Failure to file a tax return each year will jeopardize an affiliate’s nonprofit status and may be cause for disaffiliation from the ACE Mentor Program of America.

7. Register in State as a Charitable Organization

Many states, and in some cases localities, require a nonprofit to register as a charitable organization before it can solicit funds in the state. Because each state has different requirements, the advice of legal counsel is very important to understand and comply with a state’s regulations.  Failure to follow these requirements can result in revocation of an affiliate’s nonprofit status within its state.

The Unified Registration Statement (URS) website is a useful resource to check state-by-state requirements for registering as a charity and to download a common registration statement that some states use.

Once an affiliate receives confirmation from its state approving its nonprofit status, the affiliate should carefully save this document in its records and email a scanned copy to its Regional Director.

8. Obtain Sales Tax Exemption

Many states provide a sales tax exemption to tax-exempt organizations.

Affiliates should check with their state regarding the procedures to obtain this exemption.  It can save an affiliate money when purchasing supplies organizing special events like a scholarship breakfast.

9. Review Insurance Coverage

Once the National Office has approved an affiliate, it will be added to ACE National’s umbrella insurance policy. Upon request, Regional Directors will provide an affiliate with a statement of insurance detailing ACE’s coverage.  (For more details about insurance, see Chapter 8 | Insurance)

II. INITIAL OPERATIONAL STEPS

Regional Directors are available to assist new affiliates as they launch the operations described below.  They have a wealth of experience to share.

1. Start-up Checklist

After a new affiliate has completed all the steps outlined in section I above, its Regional Director will go through a start-up checklist with the affiliate leaders to ensure all required documents and information have been submitted fully and properly.

2. Affiliate Webpage

ACE National will set up on its website a page for the affiliate and also create a profile in the ACE database. The affiliate needs to designate an individual to be responsible for the website and the database. This point person will receive the affiliate’s user name and password for the Behind the Scenes section of the website to administer the affiliate’s database records.

3. Board of Directors

The Board should meet and establish a strategy for the affiliate. Board members should undergo an orientation to understand ACE’s mission and their responsibilities.  All Board members must register in the ACE database. (See Chapter 4 | Building + Running a Board)

4. Mentors

Recruitment of mentors can start as soon as the affiliate is formally established. (See Chapter 9 for more information about Mentors.) They should be directed to register on the ACE website. The program cannot begin until the mentors are registered in the database, have passed a background check, and have completed the on-line mentor training module.

5. Students

Student recruitment can also start. They must register through the ACE website and submit a signed Parent Consent form. Information and materials are available on the website for purposes of recruiting students (see also Chapter 10 | Schools + Students for more details).

III. SAMPLE LETTER OF INCLUSION

The following document is a Sample Letter for Inclusion under ACE’s Nonprofit Umbrella.