What Future Nonprofit Leaders Need to Know
Starting a 501c3 is noble; however, navigating the legal and administrative requirements can feel overwhelming. From filing key documents to ensuring compliance with state and federal laws, understanding the necessary steps is critical to laying a solid foundation for your organization. This article will break down the essential documents, filing requirements and legal steps for starting a nonprofit successfully, at both the state and federal level.
1. Define The Nonprofit’s Purpose
Every nonprofit starts with a clear and compelling mission. Before filing paperwork with the state and IRS, articulate the organization’s purpose and how it will serve the community.
Action Steps:
Take the time to craft a compelling mission statement that outlines the goals and beneficiaries and inspires and focuses the efforts.
Research similar organizations to ensure the mission fills an unmet need.
2. Choose a Compelling Name for The Nonprofit
The nonprofit’s name should reflect its mission and be unique and memorable. Once you have a short-list, bounce the naming ideas off other business leaders, family and friends to gather feedback and guidance. Conduct a name search to ensure the name is not already in use. Don’t be afraid to let the creativity shine during the name brainstorming process.
Checklist:
- Verify name availability with the state’s business registry.
- Secure the nonprofit’s domain name for its website.
- Ensure the name complies with state naming conventions.
3. File Articles of Incorporation
The Articles of Incorporation establish the nonprofit as a legal entity and include basic information about the organization. Think of it as the official birth certificate of the organization.
Key Inclusions:
- The nonprofit’s name and address
- The purpose of the organization (aligned with IRS requirements for tax-exempt status)
- Information about the registered agent and incorporators
Tip: Filing requirements and fees vary by state, so check the state’s nonprofit incorporation guidelines.
4. Draft Bylaws and Appoint a Board of Directors
The nonprofit’s bylaws govern its operations, and the board of directors is crucial in overseeing its activities and ensuring accountability. This structure should give officers, board members, and any other stakeholders confidence in the nonprofit’s operations.
Steps to Take:
Outline the nonprofit’s structure, decision-making processes, and policies in the bylaws.
Recruit board members with diverse expertise in fundraising, legal, and community engagement skills. The IRS states you must have a minimum of three board members, with their names listed. Family must not make up more the 49% of the board members.
Pro Tip: Many states require nonprofits to adopt bylaws during the incorporation process.
5. Apply for an EIN (Employer Identification Number)
An EIN is a federal tax ID issued by the IRS, and it is required to open a bank account, hire employees, and file tax forms. An EIN application can be completed online through the IRS website at no cost. Think of the EIN as the social security number of the organization.
6. File for 501(c)(3) Tax-Exempt Status
The IRS requires filing IRS Form 1023 or Form 1023-EZ to secure the 501(c)(3) tax-exempt status. Approval allows the nonprofit to receive tax-deductible donations and access other benefits.
Requirements for Filing:
- A detailed description of the nonprofit’s activities
- Financial projections or current financial data
- A copy of the Articles of Incorporation and bylaws
Simplify the Process: The 501(C)(3) Center specializes in helping organizations navigate the 501(c)(3) application process.
7. Register for State and Local Compliance
Depending on the state, additional registrations may be required to solicit donations or operate legally.
Common Requirements:
- Charitable solicitation registration
- Sales tax exemption applications
- Local business licenses or permits
Simplify the Process
The 501(C)(3) Center specializes in helping organizations navigate the 501(c)(3) application process.
Navigating nonprofit formation can be complex, but nonprofit leaders do not have to do it alone. At 501(C)(3) Center, we simplify the process by handling incorporation, 501(c)(3) applications. By leveraging the expertise of the 501(c)(3) Center, nonprofit leaders can focus on building a successful nonprofit while we handle the paperwork.
###
501c3 Center was started as an alternative to filing directly through the IRS, as the process can be cumbersome and time-consuming for new or small nonprofits. Our mission is to provide an easy-to-use and low-cost method for new and smaller nonprofits to incorporate and apply for IRS 501(c)(3) tax exemption. Today, we help small nonprofits get started on their 501(c)(3) journey while also helping these nonprofits meet their annual 990-N IRS filing requirements. We aim to help small nonprofits navigate the tricky legal jargon at an affordable price through our easy-to-use platform. We’re also a direct eFile partner with the IRS, so your 990-N filings should be processed quickly!
Need more Support?
501(c)(3) Center is a division of BryteBridge Nonprofit Solutions. If your organization seeks full-service support, we encourage you to leverage BryteBridge Nonprofit Solutions to navigate more complex 501(c)(3), 990 Tax, and Compliance needs or those seeking more hands-on experience. BryteBridge also provides ongoing education through boot camps, online courses, and coaching to help your organization grow.
We have over 20 years of experience helping nonprofit organizations form and stay compliant. We remove the paperwork and administrative headaches so you can focus on your mission.