Nonprofits with 501(c)(3) tax-exempt status enjoy many benefits.
Nonprofits with 501(c)(3) tax-exempt status play an important role in society, providing valuable resources to many individuals. A 501(c)(3) is a nonprofit organization that is exempt from federal corporate income taxes. 501(c)(3) nonprofits do not distribute profits to partners, but rather invest profits back into the nonprofit organization to advance their programs. Starting a 501(c)(3) requires individuals to follow specific instructions and comply with federal, state and local laws. Knowing the appropriate steps to take will help your nonprofit achieve 501(c)(3) tax-exempt status.
Instructions
1. Choose an available business name that is in compliance with the law. You can call the secretary of state's office to check the availability of the name you're interested in. The name of your nonprofit must end in a corporate designator and cannot include the terms "Cooperative," "National," "United States,"
"Federal," "Reserve" or "Bank." A corporate designator includes the term or the abbreviation of "Incorporated," "Corporation," "Company" or "Limited."
2. Select a board of directors for your nonprofit organization. Directors set the operating and governing rules for the nonprofit. Most states require nonprofit organizations to have at least three individuals on the board of directors, but some states require only one director.
3. Download and print the "Articles of Incorporation" form from your secretary of state's website. This form is used to recognize your organization as a nonprofit in your state. Articles of Incorporation are usually available for pick-up in the secretary of state's office, as well.
4. Fill out the articles of incorporation form. The form may differ slightly per state. Most articles of incorporation require the name and legal address of the nonprofit, name and address of initial directors, name of registered agent, and your purpose for forming.
5. Submit the completed articles of incorporation to your secretary of state's office. Most states require you to send an additional copy, as well. The secretary of state's office will send you a certification of incorporation if your nonprofit is successfully formed.
6. Create bylaws for your nonprofit organization. Bylaws are a list of rules and regulations created by the founders of the nonprofit to govern its operation and internal management. Bylaws include details about holding meetings, the process of appointing directors and members, and voting rules.
7. Visit the Internal Revenue Service's website to apply for an employer identification number (EIN). The EIN is used by the IRS to identify a business entity. There is no cost to apply for an EIN.
8. Download and print Form 1023 from the IRS website. This form is used to apply for tax-exempt status under section 501(c)(3) of the Internal Revenue Code.
9. Fill out Form 1023 completely. Submit Form 1023 to the Internal Revenue Service (P.O. Box 12192, Covington, KY 41012-0192). The IRS will send you a determination letter outlining the status of your nonprofit and explaining which section of the Internal Revenue Code your nonprofit falls under.
10. Register your nonprofit for state and local tax-exemption, if necessary. Some states require you to submit an additional form for this process. Other states automatically grant tax-exemption to nonprofits that have filed articles of incorporation and received 501(c)(3) tax-exempt status.
11. Apply for necessary licenses and permits. You may need to obtain a business license, depending on the nature of your nonprofit organization. For example, nonprofits that plan to sell anything to consumers will need a local business license.
