Are you Wondering How to Set Up a 501(c)(3)?

Several steps must be taken to establish a non-profit organization, including research, planning, fundraising, etc. Furthermore, non-profits must be successful in overcoming technical, accounting, and legal obstacles. One of the last steps, which makes up a considerable portion of what we do, is to form a non-profit.


Step 1. Set up a non-profit corporation

The article of incorporation, a state-wide document, is the first step in the formation of a non-profit corporation. Generally, non-profit organizations form corporations in order to protect their officers and directors from liability.

Corporations are formed by obtaining a federal tax identification number (FEIN) from the IRS and by establishing bylaws. These documents outline the rules the board is to follow.

Step 2. Apply to become a 501(c)(3) organization through the IRS

Starting a company is much more complicated than incorporating. To qualify for 501(c)(3) status, non-profit organizations must submit IRS Form 1023, which requests exemption from taxation. When one knows what each of these steps entails, one can follow them to form a corporation. However, if you want to apply for 501(c) (3) tax-exempt status, the process is completely different. For organizations that are 501(c)(3), their programs must meet the stated purpose of their formation, and they must ensure they are designed to accomplish these goals. Aside from this, the IRS assesses whether there are conflicts of interest and possible insider benefits, both of which can lead to denial.

Step 3. Compliance issues with the state

Non-profit organizations must be exempt from federal taxes by virtue of having 501(c)(3)status. However, before moving forward, it is important to address two other issues.

Registration is required for a charitable solicitation 

In 40 states, registration of businesses is usually the responsibility of the Attorney General. Business registration is usually required before soliciting donations in most states.

A corporation is not subject to state corporate taxes.

A majority of states offer exemptions from corporation tax for organizations with 501(c)(3)status. States like California and Texas require various forms of charity applications to be submitted through their processes. The process of registering with each state is generally simpler, but each state must submit its own application.

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