Once a person or group decides to form a nonprofit organization, one of the first issues that must be addressed is where this entity will be formed. Some states may be more attractive than others due to several factors. For instance, states such as New York and California are more intense in terms of regulating nonprofit entities than other states. Moreover, state laws may differ about the requirements the entity must satisfy in order to qualify for taxexempt status.
A nonprofit organization may form under the laws in one state but operate in a different state. This option may be advantageous when the laws of one state allow those who form the nonprofit entity to fulfill the purpose of the entity better than the laws of another state. On the other hand, this option is usually more costly because both the state in which the entity is formed and the state where the entity operates will charge fees.