The application process to become a nonprofit entity is relatively easy, requiring both state incorporation as a nonprofit and approval by the Internal Revenue Service (IRS). The application process can be can be made much easier with some early planning and internal organization.
Instructions
1. Establish goals and leadership for your nonprofit. Before an organization can be deemed a charity by the Internal Revenue Service, it must have a charitable purpose. Charitable purposes cover a range of activities, and common sense largely dictates whether something qualifies. The leadership of the charity should be clearly established early, and leaders should not be in a position to make unreasonable financial gains from their roles.
2. Draft and adopt articles of incorporation and bylaws for the charity. The articles of incorporation should address only the basic information about the charity, including the address, its board of directors and its name. Some states have a form that can be used in lieu of drafting articles. Bylaws should detail how the organization will operate. This might include details such as the election of board members and the budgetary process. The bylaws should be much more detailed than the articles of incorporation.
3. Establish nonprofit corporation status with the appropriate secretary of state. Many secretaries of state accept applications both via mail and online. There is generally a fee associated with the application, and in most states the paperwork is complete in about a week.
4. Create pro forma financials for the charity. Donors, in addition to the IRS, may be interested in seeing sound financial recording. For IRS purposes, a pro forma balance sheet, statement of revenues and statement of expenses should be prepared for the current year and projected for the two years following.
5. Complete IRS Form 1023. This form requires information that should be readily available from the documents described in the previous steps, including basic contact information, the purpose of the charity and its financials. A copy of the bylaws should be included as well. The fee for the application is $300 for small charities and $700 for larger ones. This process can be slow--expect six weeks or more for processing.
