Know This 9-Step Process To Start a 501c3 Organization

Starting an organization and registering for a non-profit status seems like a complicated task. It is because running an organization with a non-profit status requires, complying with bylaws, attaining and maintaining tax-exempt status, managing a Board of Directors, etc. By knowing the right information and with a systematic approach completing the process becomes easier. 


Thus, starting a non-profit organization requires the following things: 

  • Strategy 
  • Planning 
  • Commitment 
  • Organizational skills

You will need to invest time, money, and energy to start and sustain a non-profit organization. Now when it comes to starting a non-profit organization the first thing that you must consider doing is to obtain the 501c3 status for your organization. Now, what is a 501c3 status? You will get to know about it in this blog itself.

This blog is a perfect guide to know how to start a 501c3 organization. It requires going through a definite procedure and we have broken it down into 9 simple steps. Just simply follow these steps to get your work done.

What is a 501c3 status?

The 501c3 status is a section that is a part of the Internal Revenue Code (IRC) of the United States. It allows federal tax exemption of non-profit organizations that are located anywhere in the country. A 501c3 organization can be a corporation, trust, incorporated association, or other types of organizations that are considered charitable. Non-profit organizations with the 501c3 status are exempt from federal income tax under section 501c3 of title 26 of the United States Code.

Note that organizations must be considered charitable by the Internal Revenue Services (IRS) to receive a 501c3 classification. According to the IRS charitable entities can obtain the 501c3 status if the entities have the following purposes:

  • Religious 
  • Charitable 
  • Scientific 
  • Testing for Public Safety 
  • Literary 
  • Educational 
  • Fostering national or international amateur sports 
  • Prevention of cruelty to children and animals

Know the 9 step process to start a 501c3 organization

  • Have a clear purpose 
  • Decide the type of non-profit organization you want to build. 
  • Name your non-profit organization. 
  • Form a Board. 
  • Write the bylaws. 
  • File your incorporation paperwork properly. 
  • File for 501c3 tax-exemption. 
  • Ensure ongoing compliance. 
  • Get donations.

Just simply follow these steps and you will be able to obtain the 501c3 organization.

Have a clear purpose

At the very beginning, it is important to get clear on your purpose before discussing the practicalities of registering a non-profit organization. If you have a clear purpose then you will be able to motivate staff and volunteers and attract donors and supporters. Once you are able to communicate your purpose, every step will get simpler.

Ask some basic investigative questions to get clear on your purpose. These questions are, who, what, where, why, and how. Don’t rush the process instead take time and reflect on the information you gather

Decide the type of non-profit organization you want to build.

Based on the purpose, decide which type of non-profit organization you want to register. Your organization must fall into one of these 8 broad categories in order to apply for tax exemption. 

  • Charitable 
  • Religious 
  • Educational 
  • Testing for public safety 
  • Literary 
  • Youth/amateur sports competition 
  • Scientific 
  • Cruelty prevention for animals and children

You should know that there are 29 types of no-profit organizations that can file for tax exemption under section 501c of the Internal Revenue Code (IRC). 501c3 is the most common status for non-profit organizations.

Name your non-profit organization

When it comes to establishing a nonprofit in the United States it is important to follow the rules and regulations of the states. Every state in the United States has different rules and regulations for establishing a non-profit organization.

You should select a name that’s unique and somehow related to the main activities of your nonprofit. This decision will set the tone and influence your nonprofit’s brand in the long run. Make sure that the name of your non-profit organization is easy to pronounce and remember. Use descriptive words and don't use technical or industry-specific jargon.

Form a Board

Before incorporating, consider forming a Board. In your incorporation documents list the names of your Board members. It is because hiring the right Board is essential for the success of your nonprofit. Your Board can help your organization with the incorporation. It is essential to hire Board members who are committed, dependable, and aligned with your values and mission. 

Write your bylaws

The bylaws contain the operating rules and provide a framework for the procedure of management. They are considered the tools of internal accountability and they outline the inner workings of the non-profit organization. So basically the bylaws contain procedures and rules for things like holding meetings, appointing officers, electing directors, and taking care of other formalities. 

File your incorporation paperwork properly

In your incorporation paperwork, you must officially declare your organization’s name, purpose, location, the initial Board of Directors, etc. With your state’s corporate filing office you must file “articles of incorporation”. You will be ready to send them to your state filing office after completing your paperwork.

File for 501c3 tax-exemption.

You will need to apply for tax-exempt status with the Internal Revenue Service (IRS). You will do this by filing IRS form 1023 to get recognition of tax exemption. The 1023 form is 28 pages long, and that is why the process of filing is pretty time-consuming. By searching on the internet, get in-detailed information.

Ensure ongoing compliance  

You should prepare for annual reporting requirements after getting approval from the states. You must file some version of Form 990 with the IRS depending on the activities of the exempt organization. Form 990 shows your organization’s finances, activities, governance processes, directors, and other key staff, and it is open to public inspection.

Get donation

A non-profit organization has several fundraising sources which include solicitation letters and events. Nowadays, online donations have become the most popular, convenient, and affordable alternative.

Conclusion

Now you know how to start a 501c3 organization. We have also given information so that readers can understand the concept of 501c3 organizations. It is your time to obtain the 501c3 for tax exemption.

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