How to Start a 501(c)(3) Nonprofit Organization: A Step-by-Step Guide
Starting a nonprofit corporation is a meaningful way to contribute to your community or champion a cause you’re passionate about. Obtaining 501(c)(3) status from the IRS for your nonprofit can provide tax-exempt benefits that help your nonprofit grow and achieve its mission. What follows is a general guideline on the steps required to start a 501(c)(3) nonprofit corporation.
1. Understand What a 501(c)(3) Is
A 501(c)(3) organization is a nonprofit entity that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. These organizations typically operate for charitable, religious, educational, scientific, or literary purposes. Contributions made to 501(c)(3) nonprofit organizations are tax-deductible for donors, making it easier to secure funding.
2. Identify Your Mission and Vision
Define Your Purpose: Clearly outline the problem your nonprofit will address and the solution you plan to offer.
Craft Your Mission Statement: This should succinctly explain your nonprofit's goals and whom you serve.
Establish Core Values: These principles will guide your organization’s operations and decision-making.
3. Choose a Name for Your Nonprofit
Check that the name is unique and not already in use by another entity in your state.
Verify domain name availability for your nonprofit’s website.
Follow state naming requirements (e.g., some states require the name to include “Inc.,” “Corporation,” or “Incorporated”).
4. Recruit a Board of Directors
Most states require a minimum of three directors. Your Board will:
Provide governance and oversight;
Ensure your organization operates in compliance with legal and ethical standards; and
Help with fundraising and strategic planning.
5. Incorporate Your Nonprofit
File Articles of Incorporation with your state’s Secretary of State or equivalent office to set up your nonprofit corporation. These articles typically include:
Your nonprofit’s name;
Its purpose (aligned with 501(c)(3) requirements); and
Information about your Board of Directors.
Most states charge a filing fee, usually ranging from $20 to $125.
6. Draft Your Nonprofit’s Bylaws
Bylaws are the governing document for your nonprofit. They should include:
Rules for Board meetings, elections, and decision-making;
Roles and responsibilities of Bboard members and officers; and
Procedures for handling conflicts of interest.
7. Apply for an EIN (Employer Identification Number)
An EIN is required to open a bank account, hire employees, and file for 501(c)(3) status. You can obtain an EIN for free through the IRS website.
8. File for Federal Tax-Exempt Status (Form 1023 or 1023-EZ)
To apply for 501(c)(3) status from the IRS, you’ll need to:
Determine the correct form:
Form 1023: For larger organizations or those with more complex operations.
Form 1023-EZ: A streamlined form for smaller nonprofits with gross receipts of less than $50,000 and assets under $250,000.
Submit supporting documents: Include your bylaws, Articles of Incorporation, and a detailed description of your programs and activities.
Pay the application fee: $275 for Form 1023-EZ; $600 for Form 1023.
Processing time commonly ranges between 6-10 months, depending on the form and the complexity of your application.
9. Comply with State and Local Requirements
Register for Charitable Solicitation: Some states require nonprofits to register before soliciting donations.
Apply for State Tax Exemption: This is separate from federal tax exemption and varies by state.
Obtain Necessary Permits: Depending on your activities, you may need additional licenses or permits.
10. Develop a Fundraising and Marketing Plan
Secure Initial Funding: Use grants, crowdfunding, individual donations, and/or sponsorships.
Build a Website: Include your mission, programs, and donation options. Be sure that your website is compliant with any statements regarding donations, 501(c)(3) status, and/or charitable solicitation registrations and other general website compliance requirements.
Leverage Social Media: Share your story and engage with potential supporters online.
11. Maintain Compliance and Transparency
Once established, your nonprofit must:
File annual reports, such as Form 990, with the IRS.
Keep accurate financial records.
Hold regular Board meetings and maintain minutes.
Renew state registrations and licenses as required.
Conclusion
Starting a 501(c)(3) nonprofit organization is a rewarding journey that allows you to make a difference in the world. While the process requires careful planning and compliance with various legal requirements, the impact you can create makes it all worthwhile. By following these steps, you’ll set your nonprofit on the path to success.
Questions? Schedule a consultation with Ariella Law.
The information on this website is for informational purposes only, and does not constitute legal advice.
