- The hardest part about becoming a nonprofit is the application process. You need to apply through the Internal Revenue Service (IRS) and must provide bylaws and articles of incorporation. The application is comparatively short but must be filled out correctly and answer all of the potential questions about the corporation. The application process can take many months to work through the IRS, and they may ask more questions and request more documentation. You must also file papers with your state to incorporate in that state as an organization. In addition, the IRS may provide only provisional status for up to 5 years or more before conferring complete nonprofit status.
- Many people do not know just what nonprofit means. A nonprofit corporation can and, indeed in some cases, practically needs to make a profit. Nonprofit really refers to where the money goes. Organizations can't divide up their profit and give it out to those in charge. The profit is basically used to run the organization. It is hard to run any corporation while not making money. The best way to think of it is that the corporation was started for a purpose and that purpose was not to make anyone more wealthy.
- A nonprofit can be a charity or not. Charities have stricter guidelines. A charity can have donations that the donor can write off on his taxes. Charities usually have to serve the public in some way, either educational, religious or through financial assistance. Fundraisers for charities usually must register with the secretary of state. This allows for people to check up on people who claim to be raising money for a charity.
- Nonprofits are not completely exempt from taxes. Nonprofits must pay such things as employment taxes and sales tax on things they will not resell. Nonprofits may also have to pay taxes on other things such as unrelated income. Unrelated income is any money a charity brings in that is not directly related to their main purpose. Nonprofits must fill out a 990 tax form yearly to show where their resources are coming from.
- A nonprofit corporation can be almost any size. The word "corporation" is a legal description and is for the protection of those who are running the corporation. A nonprofit can be a few people who are volunteers or can have tens of thousands of employees.
