Do you plan on starting a non-profit organization? Here are 12 keys steps to help you get started on your journey towards tax exemption status:
Do Your Homework.
Here are a FEW things to consider:
Is your non-profit organization going to solve a problem or fill a need that is not already being met by another organization?
Research the fee(s) associated with becoming a tax exempt organization (Federal and State level).
What will be your organization’s start-up costs?
Will your organization need to hire employees?
What will be your organization’s source of revenue?
Write a Business Plan describing how your organization intends to operate and fulfill its mission. For tips on what to include in your business plan check out Non-Profit Business Plan Essentials.
Recruit Your Organization’s Initial Board Members, candidates whose skills, experience and expertise meet the needs of your non-profit.
File Your Organization’s Articles of Incorporation.
“Your organizing document must limit your purposes to those described in section 501(c)(3). Those purposes are: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. Your organizing document must permanently dedicate your assets for a section 501(c)(3) purpose. This means that if you dissolve your organization in the future, your assets must be distributed for an exempt purpose described in section 501(c)(3), or to the federal government, or to a state or local government for a public purpose.” (Source: www.irs.gov)
If your Articles of Incorporation/Organizing Document does not meet this requirement, you will need to file for an amendment with your state before applying for your tax exempt status with the IRS.
Obtain an Employer Identification Number (EIN), Form SS-4 online at www.irs.gov. It’s FREE!
Adopt Your Organization’s Bylaws, the main governing document of a non-profit organization.
Adopt Your Organization’s Conflict of Interest Policy.
“The purpose of the conflict of interest policy is to protect this tax-exempt organization's (Organization) interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Organization or might result in a possible excess benefit transaction.” (Source: www.irs.gov)
Open a Bank Account for your organization and require two authorized signers.
Complete Form 1023 or Form 1023-EZ, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code and thoroughly review the instructions and completed application in its entirety.
Submit Form 1023 or Form 1023-EZ to the IRS with all of the required attachments and the RIGHT user fee.
Your organization can operate while you wait for your 501(c)(3) IRS Determination Letter, but with restrictions (i.e. you cannot represent your organization as tax exempt to a potential donor).
Receive Your IRS Determination Letter Recognizing Exempt Status and celebrate all of your hard work! Some states require you to file for exempt status on a state level after you have received your IRS Determination Letter.
GET TO WORK and fulfill your organization’s mission and goals.