Starting a 501c3 Tax-Exempt Nonprofit Corporation

Write a Purpose Statement

A 501c3 nonprofit corporation has two layers. First, it is a nonprofit corporation that has registered at the state level by filing Nonprofit Articles of Incorporation. Second, it has been organized for one of the following IRS-accepted purposes:

• Charitable
• Scientific
• Religious
• Educational
• Literary
• Prevention of Cruelty to Children/Animals
• Fostering National or International Amateur Sports
• Testing for Public Safety

Only nonprofit corporations formed for one of the above purposes is eligible for 501c3 tax benefits.

Your purpose statement serves two important purposes:

1. It gives your potential donators and investors a detailed look at what your nonprofit organization entails.
2. It will show the IRS that you're organized under one of the accepted 501c3 purposes.

While an accepted purpose statement must specifically quote Section 501c3 of the Internal Revenue Code in order to be treated as tax exempt, note that you can always amend your Articles of Incorporation later to include the required information for an extra fee.

Select a Board of Directors

Your board of directors are crucial for the successful operations of your 501c3 nonprofit corporation; this is the group of people that will direct your organization, as well as hold the power to remove corporate officers or make other structural changes.

Because of this, it's important that you choose your board of directors wisely. One of the best ways to do this is to choose dynamic, effective, motivated people who share your vision for the direction and operation of your nonprofit organization, and who are committed to helping it succeed. Make sure the people you've selected have the ability to work as a team toward a common goal.

Register Your Nonprofit Corporation

As mentioned above, you'll need to officially register your business with the state before obtaining 501c3 status.

Your nonprofit Articles of Incorporation, in addition to your purpose statement, will include basic information about your organization. The specifics will depend on the exact requirements in your state, but generally, you can expect nonprofit Articles of Incorporation to include:

1. Your corporate name, including an appropriate corporate ending ("Inc.," "Corp.," "Incorporated," and so on)
2. Your registered agent and office
3. Your board of directors, including names and addresses
4. Your fiscal year end
5. An incorporator's signature

Once your Articles of Incorporation have been accepted and placed on file with the Secretary of State, your organization legally exists and is ready to conduct business as a nonprofit corporation.

Apply for 501c3 Status With the IRS

This is the step that allows your nonprofit organization to accept tax-deductible donations, enjoy reduced postage, and other benefits provided under Section 501c3. To obtain 501c3 status, you'll need to send your filed Articles of Incorporation, completed IRS Form 1023, any applicable Schedules of Form 1023, and financial and other supporting documentation required by the IRS.

It's important to note that the IRS can take up to 9 months to process your 501c3 application, so it's important to be sure that you complete the form carefully and have everything in order before submitting your application to avoid additional lengthy delays.

Obtain Necessary Licenses or Permits

You may be required to hold any number of licenses or permits from your city, state, or county, depending on the rules in your jurisdiction and the purpose of your nonprofit. Because this depends on local rules and regulations, you'll need to contact each level of government to determine their unique, specific requirements.

In order to ensure your 501c3 nonprofit corporation continues to run smoothly, make sure that you keep detailed and accurate records of all of your organization's activities, donations, and other activities so that you can provide any information the IRS may request. This will avoid having your 501c3 status revoked and being penalized for improperly acting as a 501c3.