How To Create A 501c3 Non-Profit Organization

Business professionals want to know the right way to create a 501(c)(3) nonprofit. Starting a nonprofit organization is a great way for business owners to help those in need. These not for profit entities provide liability protections and tax advantages to businesses in the field. In order to experience these benefits, organizations must follow federal and state guidelines to establish a nonprofit. To learn how to create a 501(c)(3) nonprofit organization, continue reading the post below.

Define Your Purpose

The first step in creating a 501(c)(3) nonprofit is to define your business purpose. A clear purpose for your nonprofit defines the goal of your organization and who you are trying to help. This is important for motivating future staff and volunteers. It also attracts donors and conveys a positive image to the public. Defining your purpose requires choosing one of the 8 broad categories. This definition must be specified on your application for tax exemption. Potential categories include religious, public safety, and cruelty prevention for children and animals. There are also several charitable subcategories like poverty relief, combating discrimination and advancing education. For example, if you are a looking to start a low income dentist charity, you would define your organizational purpose as poverty relief. Clearly defining your purpose is an essential first step to find success in 501(c)(3) nonprofit formation.

Recruit Your Board

The next step in the process is to recruit a nonprofit board. Many states require you to gather a board before incorporating your startup. Their names must be listed on the incorporation documents. Your board should be made up of individuals who have resources and expertise in different areas. One third should have access to financial resources or previous experience soliciting donations. One third should be individuals with financial, marketing and/or legal management experience, like an attorney from any top business law firms. The last third of your board should be comprised of individuals who are connected at the community level and have expertise in the field. It is important to compile a well-rounded list of board members when starting a nonprofit.

Choose And Incorporate A Name

Once you have assembled your board, you can choose and incorporate a name for your nonprofit. The name of your nonprofit must end with a corporate designation like “Incorporated,” “Limited,” or “Corporation.” It can also be an abbreviation of any of these words. State-run corporation offices can help you discover if your proposed name is available. They can also help you reserve your name for a short period while you organize your articles of incorporation. You need to file “articles of incorporation” with your state’s corporate filing office. This document will contain basic information such as your nonprofit’s name and office address. Use specific language in this document to ensure that you receive a tax-exempt status. You must choose and incorporate a name correctly in order to create a 501(c)(3) not for profit entity.

Prepare Nonprofit ByLaws

The next thing to do to create your 501(c)(3) nonprofit is to prepare your bylaws. As a nonprofit organization, you must possess and maintain a structured and meticulously worded document outlining nonprofit bylaws. These bylaws represent the rule book that governs the day-to-day activities of your corporation. When problems arise, they are used to solve any conflicts between board members and employees. Use a structured template from a reputable source to create your document. This is the most important document your 501(c)(3) requires. Preparing a structured set of bylaws is an essential step to create a 501(c)(3) nonprofit organization.

Obtain IRS Status

Lastly, you must register with the IRS to obtain 501(c)(3) status for your nonprofit. This can be a complex process, much like applying for music licenses. Look to your board members for assistance. Apply to the Internal Revenue Service for recognition of tax exemption. This means filing the IRS form 1023. Form 1023 is a 28 page long document that may require attachments, schedules and other materials. This form serves as an examination of your organization’s governing structure, purpose and planned programs. You should thoroughly read and edit this document before submitting it. The IRS examines all 1023s closely to find any conflicts-of-issue or potential benefits to insiders. These things could potentially be grounds for the denial of nonprofit status. Carefully complete and submit form 1023 to the IRS to obtain 501(c)(3) status for your nonprofit organization.

These are several steps that business owners must take to create a 501(c)(3) nonprofit organization. First, you must define your purpose and choose a category for your organization. Next, assemble a diverse team of board members to oversee your operations. Choose a name with a corporate designation and apply for incorporation status at a state-run office. Prepare a document that clearly outlines your nonprofit bylaws, and carefully complete and file application form 1023 with the IRS. Use the points mentioned above to create a 501(c)(3) nonprofit organization to start doing good for the community around you.

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