This article is an introduction to creating and incorporating a nonprofit organization and obtain 501(c)(3) tax exempt status. The steps to create a nonprofit organization by yourself are listed at the end of this article.
Introduction, Costs of Creating a Nonprofit OrganizationThe first question many people ask when considering whether to create a nonprofit organization (also known as a “nonprofit corporation”) is “how much does it cost? In most states, the entire process of creating a nonprofit organization costs just a few hundred dollars plus the cost of filing for 501(c)(3) status with the IRS (Internal Revenue Service). A nonprofit organization that is incorporated provides numerous benefits including limited liability of the officers and directors, tax exemptions, the ability to accept tax deductible donations and much more. While we will list several easy to understand articles that will take you through the steps of creating your own 501(c)(3) nonprofit organization or nonprofit corporation, first we will discuss your options and why and when you may wish to enlist the aid of a business professional.
Do I Need an Incorporation Specialist?While the incorporation process can seem daunting, many people successfully incorporate their own nonprofit organization by themselves. Many will people prefer the convenience and experience of having an experienced professional assist them with the formalities at a moderate cost. Incorporation specialists can provide guidance, help fill out required forms and file the nonprofit corporation with the state and federal government. The expertise of an incorporation specialist may make it more likely that critical mistakes aren’t made during the application process which could later cause problems, such as not qualifying for tax exempt status. Incorporation specialists also provide another key benefit – they frequently provide the convenient option of a corporate kit at a relatively low bulk rate cost. A corporate kit usually contains an impressive hardcover binder stamped with the name of the nonprofit organization, a copy of sample corporate bylaws, articles of incorporation, meeting minute pages, a corporate seal and other items.
Do I Need a Business Lawyer or an Accountant?A legal consultation with a business lawyer or an accountant is probably the safest approach to starting a new business, although it does come at a cost. A lawyer or accountant will typically include a few hours of professional advice in their quote to assist you with the process of creating a 501(c)(3) nonprofit organization properly. The guidance of an experienced attorney can be invaluable during the early stages of corporate formation, especially when the nonprofit organization may have many members with conflicting opinions, be large in ambition or the setup of the company may not be routine or complex in nature. In addition, there is also the matter of defining the powers of the organization properly and choosing the appropriate type of 501(c)(3) corporation – there are several. Whether you should choose to seek tax and legal advice from an experienced professional is up to you, but it certainly can be most helpful.
Do It Yourself: Incorporate a 501(c)(3) Nonprofit OrganizationWhile professional assistance is certain beneficial, it is not necessary – you can create your own nonprofit 501(c)(3) tax exempt organization by yourself. All of the necessary information is available to you if you know where to look. The list below will give you detailed instructions for the steps you need to take in order to successfully create your own nonprofit organization. Each article will provide best practices tips that you should read before you spend valuable time and money on filing fees. You may also wish to familiarize yourself with your state’s Secretary of State or division of corporations website as many of the forms and information you need may be provided there.
The Beginning: The Incorporator of the Nonprofit OrganizationIn order to create a nonprofit organization, a person or a group of people must serve as the incorporator(s) or creators of the corporation. Each incorporator must be a natural person at least 18 years old and the filing must provide their full name, current address and signature. They are generally responsible for completing the below steps, filing the certificate of incorporation with the Department of State and adopting the corporate bylaws.
Steps to Create a Nonprofit Organization / Nonprofit Corporation
- Define the primary purpose and mission statement of your nonprofit organization
- Choose a company name for your nonprofit organization that complies with state and federal law
- Review 501(c)(3) tax exemption requirements prior to filing
- Appoint the initial directors of the corporation
- Create and file the Articles of Organization
- Apply for tax exempt status from the IRS and your state tax division
- Create the bylaws (rules and policies) for your nonprofit organization
- Hold your initial board of directors meeting
- Apply for any permits, licenses or legal requirements necessary to run the business of the organization
The next step in the process of creating a nonprofit organization is defining the primary purpose of your organization.
- Business, Corporate & Nonprofit Law:
- Formation of a Business
Non-profit How to Create a Nonprofit Organization of Foundation
By Michael Wechsler |
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