Create 501C
The Internal Revenue Service (IRS) created the designation "501(c)", to refer to a section of statutes dealing with the creation of a nonprofit corporation which would be a "public charity" or a "private foundation." Religious, charitable, educational, scientific and arts organizations are some types which can qualify for this status. While nonprofit organizations do not pay property or business income taxes, their fiscal dealings are scrutinized closely, and they must operate within strict federal and state guidelines. All revenue generated by a 501(c) organization must be used to further the mission of the organization.
Instructions
1. Choose a Business Name
The name of your nonprofit must be unique and cannot be the same as the name of another corporation on file with the corporations division of your state. The name should also end with a corporate designator, such as Corporation, Incorporated, Limited, LLC, , Corp., Inc., or Ltd. This is a requirement in about 50% of the states and suggested in the others. The chosen name cannot contain any words prohibited by the state or federal government (i.e. Bank, Cooperative, Federal, National, United States, or Reserve, etc.)
2. Formulate a Mission Statement
This should be a simple, easily understood one- or two-sentence paragraph that explains the goals and purposes of your organization.
3. Form a Board of Directors
Individual states have requirements detailing the minimum number of board members for a 501(c) corporation. Since the board members will be donating their time, give careful thought to individuals who believe in and support the purpose of the organization and who are reliable. While directors can sometimes be named after the bylaws are written, their input may be valuable in preparing the paperwork.
4. Develop Bylaws
The bylaws are the rules governing how the organization will operate. You would be well advised to seek the assistance of an attorney familiar with 501(c) companies at this stage.
5. Prepare and File Incorporation Papers
These documents are called by different names in various states, including articles of incorporation, articles of organization, certificate of incorporation, certificate of formation, or company or corporate charter.
The website for your state's corporate filing office, normally the Secretary of State, may have sample articles of incorporation for 501(c) companies. The articles may be fill-in-the-blank forms or examples to follow. Preparing these documents aren't extremely difficult, but specific language must be included or you won't be able to receive tax-exempt status. If in doubt, contact an attorney familiar with this process.
6. Apply for the 501(c) Tax Exempt Status from the IRS
After your state's corporate filing office returns a copy of the filed articles, it is time to submit the federal 501(c) tax-exemption application to the IRS, along with a copy of the filed articles. This step is extremely important since most of the benefits of being a nonprofit flow from 501(c)(3) tax-exempt status.
To apply for the exemption, complete IRS Package 1023, Application for Recognition of Exemption. For assistance in filling out this form, IRS Publication 557, "Tax-Exempt Status for Your Organization," can be helpful. You can obtain copies of the package and the publication at no charge by calling 800-TAX-FORM, or you can download them from the IRS website, www.irs.gov.
7. Apply for State Tax Exemption
Some states require an additional form for the corporation to be exempt from state taxes. Contact your state tax agency to find out what, if any, steps must be taken to complete this process.
8. Hold a Directors Meeting
This is not just a formality---important business takes place at this meeting. The directors conduct the initial business of the corporation and handle the initial formalities, such as recording the receipt of federal and state tax exemptions, voting to adopt the bylaws and electing officers.
