How To Register A Non-profit Business

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Nonprofit organizations are responsible for doing so many amazing things, from combatting hunger and homelessness, to helping sick children and animals. Merely no one said saving the earth was easy. While there are multiple steps to registering a business, you have to bound through even more hoops if you want to register a nonprofit business. All the same, officially registering as a nonprofit is important because information technology legitimizes your organization and provides it with some singled-out advantages. In particular, nonprofits registered as 501(c)(3) organizations have a tax-exempt status, which means they exercise not take to pay federal or land income revenue enhancement.

Whether you want to start a nonprofit or have already begun your nonprofit, it's important to make sure your organization is properly registered, compliant, and set for success. Read on for an actionable, step-by-step guide to assistance you make your nonprofit official.

Why Annals As A Nonprofit?

It is possible to informally operate as a nonprofit organization without officially registering every bit a nonprofit. However, until you lot make it official, y'all are basically turning away costless money, every bit well as other benefits.

Here are the main reasons to annals your nonprofit:

Legal Protections: Nonprofit corporations have express liability protection, which protects directors and members from beingness held personally responsible for the organization's debts or liabilities. The nonprofit is considered a divide entity that can enter into contracts, sue or be sued, take out concern loans, etc., without anyone who works for the nonprofit being held personally liable.
Tax Benefits: In one case yous accept your federal and land tax-exempt status, your system will be exempt from paying income tax. There are also taxation benefits for donors, who can deduct donations made to 501(c)(3) organizations on their taxes.
Access To Grants: Many business grants are only available to organizations registered as nonprofits.
Access To Discounts: With proof of your nonprofit status, your organisation is eligible for various discounts, such as USPS nonprofit discounts and credit menu processing discounts for nonprofits.
Crowdfunding Eligibility: 501(c)(3) status lets you lot raise coin through certain nonprofit crowdfunding platforms, such as CrowdRise. Some crowdfunding platforms will also eliminate platform fees for registered nonprofit entities.
Brownie: An official nonprofit status lets people know your system is legit and not merely a agglomeration of yahoos or fifty-fifty scammers. Obtaining your nonprofit status is probable to attract more than donors and larger donations.

How To Register Your Nonprofit In 8 Steps

The process to execute some of these steps varies somewhat from state to state. For instance, in some states, you will need to utilise for both federal and state taxation-exempt status. Only wherever you live, y'all volition need to follow all of the below 8 steps.

1. Select A Proper name

Though you may have a working proper noun for your organization, to make your nonprofit official, you will accept to make certain that name is bachelor and hasn't already been trademarked. After you lot choose your name, check with your Secretary of State office every bit well as the U.South. Department of Commerce website to ensure that it is available. Y'all can normally pay a nominal fee to reserve your proper name until you file your manufactures of incorporation.

2. Course Your Board Of Directors

More often than not, you should form your lath of directors earlier incorporating. Some, just not all states require that you list your lath members' names in the incorporation documents. Y'all'll likewise need to list at least 3 directors when yous file for your 501(c)(iii) tax-exempt status. These members should ideally be unrelated (by blood or marriage).

3. File Articles Of Incorporation

This is the documentation that forms an official corporation for your nonprofit and volition be filed with your secretary of state. It includes information such as your organization's name, location, board of directors, and purpose (what your nonprofit is beingness created to do/provide). Although incorporating your nonprofit does not make information technology tax-exempt, y'all will need to include sure language in the articles of incorporation for when y'all apply for tax-exempt status later—your land'southward nonprofit formation packet should include the required information.

Some states also crave you to publish a detect of incorporation with your local newspaper.

iv. Write Bylaws

After your manufactures of incorporation take been approved, you can write your bylaws. These are your nonprofit's internal rules and guidelines for procedures such every bit holding issues, voting, and electing officers. You will need to include a copy of your bylaws in your 501(c)(iii) awarding.

5. Hold First Lath Meeting

At your first lath coming together, you lot will brand your articles of incorporation part of the official record, adopt your bylaws, and elect officers. Someone will need to take minutes, which y'all will keep on file. It's recommended that you hold this initial board coming together before you file for federal tax-exempt status. In a later on meeting, y'all can tape the receipt of federal and state tax exemptions.

half dozen. File For EIN

The final matter you need to practise before filing for your 501(c)(three) condition is to use for an Employer Identification Number (EIN). You need to do this fifty-fifty if y'all don't take employees yet, every bit it is required by the IRS to obtain your tax-exempt status. The IRS uses your EIN to track your organization's financial activities. You'll likewise demand an EIN later on when you open up a business concern depository financial institution account and hire employees.

To obtain an EIN, file Form SS-4 with the IRS.

7. File For Tax-Exempt Status

After y'all have your directors, incorporated condition, bylaws, and EIN, it'due south finally fourth dimension to file for your federal taxation-exempt condition with the IRS. For nonprofits in virtually states, yous only need to do this at the federal level, just some states require you to file for tax-exempt status at the country level too. For example, nonprofits in California must also utilise for tax exemption with the California Franchise Taxation Board later on obtaining tax-exempt status from the IRS.

To use for your federal tax-exempt status nether department 501(c)(3) of the Internal Revenue Code, y'all volition need to file Course 1023 with the IRS. If your organisation has gross receipts of less than $50K and less than $250K in assets, you can file the iii-page 1023-EZ awarding (vs. the 26-page standard 1023).

Some data you'll need to include in your 1023 awarding:

Your budget, including any residuum sheets or other financial information
The names of your directors
Copy of your articles of incorporation
Copy of your bylaws
Dissolution clause (usually included in articles of incorporation or bylaws)
Disharmonize of interest clause (normally included in articles of incorporation or bylaws)
Statement of exempt purpose (normally included in articles of incorporation or bylaws)

In society to ensure that your application meets all state and federal requirements, information technology's a good idea to consult with a lawyer or someone familiar with tax-exempt constabulary. Including attachments, a 501(c)(3) application package can easily exceed 50 pages.

Note that even afterward your organization receives its letter of the alphabet of determination from the IRS with its tax-exempt condition, each year yous will have to submit Form 990 in order to maintain your 501(c)(3) status. This document provides financial data about your organization to both the IRS and to the public.

8. Obtain Business organization Licenses & Permits

Once you have your tax-exempt condition, you're virtually ready to start raising funds. Merely starting time, yous'll demand to brand certain you're in compliance with all business organization licenses and permits applicative to your land and your organization's activities. For example, y'all may demand a sales permit or a zoning let. Cheque with your local department of consumer affairs to find out what kind of licenses and permits y'all demand to operate as a charitable organization in your particular country. Some cities may require a city business let also.

Registering As A Nonprofit: FAQs

How long does it take to register a nonprofit?

The IRS estimates it will take 100 hours to make full out Class 1023. The application process typically takes between 3-6 months, though it could accept as long as a year, depending on whether the IRS has follow-up questions and how quickly you provide the answers.

How much does registering a nonprofit price?

To file for 501(c)(3) condition, y'all will pay either $600 to file Form 1023, or $275 to file Class 1023-EZ.

The costs of incorporating and obtaining the necessary permits to operate as a nonprofit vary from state to state; however, they usually do not exceed $100-$200.

Is the registration procedure different in each state?

Aye, somewhat. Check with your state to run across if you need to complete any actress steps, such as publishing your nonprofit'southward manufactures of incorporation or filing for state-level tax exemption.

Can any arrangement annals as a nonprofit?

No. Your organization must run across the IRS's definition of a public charity (the nigh common type of 501(c)(three) organization), individual foundation, or private operating foundation. Be certain to read upwardly on the IRS' exemption requirements for 501(c)(3) organizations before you apply.

Tin can I register my business equally a nonprofit to dodge taxes or go rich?

No. The IRS has strict regulations in place to make sure that businesses cannot use misuse their 501(c)(3) status for personal gain or to avoid paying taxes. All of your organization'southward financial information, including salaries and use of income, will be closely and regularly scrutinized to wait out for possible fraud and conflicts of interest. For example, if your nonprofit brings in $500K a year, you will not be able to get away with paying yourself a $200K salary.

Should I hire a lawyer to assist with the registration process?

Yes, it is a expert idea for commencement-timers to consult with a legal professional person at some point to ensure compliance with all state and federal requirements, particularly when filling out the incorporation paperwork and when preparing the 501(c)(3) forms.

Final Thoughts

Whether they benefit schools, the surroundings, public prophylactic, or another crusade, nonprofit organizations practise a lot of good in this world. But if a nonprofit is not officially registered, then information technology tin but make a express impact. When a charitable organization is incorporated as a nonprofit corporation and obtains a 501(c)(three) status from the IRS, the organization does non have to pay income taxes on the money information technology brings in, and the arrangement becomes eligible for other funding opportunities, including government grants and charitable crowdfunding platforms. Additionally, donors are more motivated to donate to IRS-registered nonprofits considering any contributions they make to these organizations are tax-deductible.

In that location is some work involved in registering a nonprofit and maintaining nonprofit status, just your charity and your cause will ultimately do good from your diligence. If you're not certain your nonprofit qualifies for 501(c)(3) status, the IRS has information you lot can review on the various types of taxation-exempt/nonprofit organizations, including 501(c)(3) and others. If you lot think perhaps a nonprofit structure is non correct for your organization after all, I recommend reading our article on the different types of concern structures.