Forming a 501c3 Non Profit Corporation

Is a 501c3 non-profit corporation right for you?A 501c3 non profit corporation is a popular way to incorporate a not-for-profit business for entities whose business purpose is scientific, literary, educational, religious, or charitable, or some combination thereof.

So long as your 501c3 non profit corporation is organized for one of those reasons set forth above and you meet other IRS requirements, your entity will be eligible for federal and state tax exemptions. Once your non profit corporation receives 501c3 tax-exempt status from the IRS, you will be able to accept donations from individuals and other companies, and they will be able to write off those donations.

Similarities between 501c3s and for-profit corporations

As long as a non profit organization follows all of the corporate formalities and guidelines required to keep its corporate veil intact, the directors, trustees, members, and officers of the non profit organization are afforded the same limited liability status as their for-profit counterparts. Some of these corporate formalities include keeping minutes of all shareholder meetings, ensuring that all directors and officers have an involvement with the company, and keeping corporate and personal finances completely separate.

Purposes for which you can form a non profit 501c3 corporation

The following list outlines the accepted purposes for which a 501c3 non profit corporation can be formed:

  • Scientific: research that is carried on in the public interest (e.g., a non profit corporation that is set up to do cancer research);
  • Literary: writing, publishing, and distribution of books and other written materials directed toward promoting public interest rather than commercial publishing (e.g., a non profit corporation that is set up to help people in prison publish poetry);
  • Educational: any kind of teaching or instruction that allows for self-development and benefits the community as a whole (e.g., a non profit corporation that is set up to help illiterate people learn to read);
  • Religious: general types of religious organizations, including churches (e.g., a non profit corporation that is set up to provide free Bibles to poor people); or
  • Charitable: services that benefit the public interest (e.g., a non profit corporation that raises money so sick kids can go to camp).

Specific advantages to being a 501c3

In addition to tax exemptions, here are some other benefits that a 501c3 non profit corporation might enjoy:

  • Lower postal rates on bulk mail;
  • Discounted advertising rates from some organizations and media outlets;
  • Discounted services from some internet providers; and
  • Some non profit corporate employees may qualify for job training and other programs subsidized by the federal government.

How does a non profit corporation obtain 501c3 status?

Because a 501c3 non profit corporation must file with both the state and the federal government, there are a few extra steps after incorporation.

  • The first step is to incorporate your basic non profit corporation under one of the accepted purposes set forth above and include the language the IRS will require in order to grant you 501c3 status.
  • Then you must obtain a Federal Tax ID number for your 501c3 non profit corporation.
  • You must also draft bylaws for your 501c3 non profit corporation.
  • Finally, you must complete IRS form 1023, which is the official application form to be recognized as a tax-exempt organization by the IRS.

When you work with Click Industries, we provide assistance with all of these required steps.

State-level reponsibilities

States, counties, and cities may offer exemptions from income, sales, and property taxes. Contact your state department of revenue and the county and city equivalents to see what you need to do. (When you form your 501c3 non profit with us, we provide you links to many of these resources.)

If your corporation wants to engage in fundraising, many states regulate such activities. You may need to obtain a permit from your state attorney general or department of commerce.

For Information By State

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