How to start a 501c3 non profit org with tax exemption

Asked 7 months ago - Marion, SC

What are the steps to start a 501c3 non profit org with tax exemptions, possible costs, paperwork, requirements, etc. Thank you!

Attorney answers (2)

  1. Samuel Watson Eastman


    Contributor Level 14


    Lawyer agrees

    Answered . To form a non-profit organization exempt from federal tax under Section 501(c)(3), you typically organize a non-profit corporation (though sometimes operating as an unincorporated non-profit entity is acceptable as well) with the Secretary of State of the state you decided to incorporate in, and have the corporate documentation drafted (e.g., the articles, bylaws, ect.). Typically, you should get an attorney to help you organize the non-profit entity to ensure that it is done correctly and to protect yourself from personal liability.

    Next, you must complete and file an IRS Form 1023 application for tax exemption under Section 501(c)(3). This process can be somewhat involved and time consuming, depending on the type of non-profit, as the Form 1023 is quite long and detailed. Depending on your expected annual revenues, the filing fee for the Form 1023 can be up to $850 and take quite a while to get approved by the IRS. However, note that you can form you non-profit and begin operating prior to receiving your determination, as the tax exemption can be retroactive for a limited amount of time. That said, this step should be taken care of as soon as possible, as it can be time intensive and there are serious tax risks if you operate your non-profit and are denied a tax exemption. It is typically best to have an attorney or CPA assist in the preparation of the Form 1023 due to the complexity often involved and the possible consequences of your exemption being denied. Note that some states have a separate filing for state tax exemption as well.

    In addition, in most states, if you solicit donations from persons in that state you must register with a state agency as a charity. Note that failure to do so can lead to serious penalties, and each state has unique requirements, though many states now accept a uniform filing. In addition, for these purposes, the definition of solicitation is often quite broad, so you must be very careful to ensure that you are registered in each state requiring you to do so.

    I highly suggest that you contact an attorney and/or CPA experienced in setting up non-profits and obtaining 501(c)(3) exemptions to make sure that you are setting up your non-profit correctly and not unknowingly subjecting yourself to personal liability for failing to do so.

    This advice is for INFORMATIONAL PURPOSES only and should not be relied upon as legal advice. No attorney-client... more
  2. Robert Jan Suhajda

    Contributor Level 17

    Answered . Excellent answer by Attorney Eastman. You can also try this website for a step by step outline.

    Disclaimer of California Attorney. Laws differ from state to state. Although the above response is believed to be... more

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