Business Structure & Entity Selection

Understanding Nonprofits

Most farmers markets in Oregon choose nonprofit corporation as their entity type, or are projects of a larger nonprofit. There are two layers to every nonprofit:

1. The State-level entity layer. For markets wanting to be a nonprofit, the first step is file as a nonprofit entity with their state. In Oregon, this is called a benefit company. Go to the Oregon Secretary of State to learn more about filing to become a benefit company.

2. The Federal-level tax layer. Filing at the state level does not make a market tax exempt. Achieving this involves applying for tax-exempt status to the IRS. The IRS evaluates the mission and activities to grant tax-exempt status, giving the market some type of 501(c) designation, of which there are many. The process to apply and become a type of 501(c) organization can be confusing and arduous—OFMA recommends working with a legal consultant with expertise in nonprofit formation.

Among nonprofit farmers markets in Oregon, a few are incorporated only at the state level and have not obtained federal nonprofit 501(c) status. Most go on to get their federal designation. These resources will help you understand the steps you need to take to have a successful application.

• Understanding Entity Selection & Tax Exemptions (slidedeck) – In this webinar recording, Lindy Laurence of Rational Unicorn Legal Services offers easy to understand explanations on selecting a business entity type, including information about entity types, IRS tax-exempt categories, and strategies for a successful 501(c)(3) application. Gain practical guidance and insights from Lindy’s experience helping farmers markets secure tax-exempt status.

• OFMA recommends becoming a member of the Nonprofit Association of Oregon and using their resources for how to start a nonprofit.

Fiscal Sponsorship

As Rational Unicorn Legal Services explains in the webinar linked to above, fiscal sponsorship is a formal arrangement in which a nonprofit organization offers their legal and tax-exempt status to a project or group engaged in activities related to the sponsor's mission. The purpose of fiscal sponsorship is to enable projects to receive grants and tax-deductible donations without having to establish their own 501(c)(3) tax-exempt status. This setup allows the sponsored project to focus on its core mission while the fiscal sponsor handles administrative tasks like donation processing, financial reporting, and ensuring compliance with tax laws.

• For more on the advantages and disadvantages of fiscal sponsorship, please watch the webinar, Understanding Entity Selection & Tax Exemptions.

• Use the fiscal sponsorship resources list available at the Nonprofit Association of Oregon to find more information.

By-Laws and Articles of Incorporation

By-laws and articles of incorporation are the two foundational legal documents that establish how an organization is formally structured and governed.

• Articles of incorporation are filed with the state to legally create the organization.

• By-laws then serve as its internal rulebook: defining membership, voting procedures, officer roles, and decision-making authority.

Together, these documents are typically drafted at the time of entity formation and should reflect your market's long-term vision and leadership structure. Browse these examples to see how other farmers market organizations have approached these documents.