How to Convert a Business to Nonprofit
Changing your business to nonprofit status can help you receive government grant funding and contracts through nonprofit organizations. You may wonder whether the benefits of having a nonprofit organization outweigh the time, stress and financial investment. Owners who want to convert their business to a nonprofit organization need to take several steps, including applying with the secretary of state and the Internal Revenue Service. The application process can prove complication and lengthy, so it is imperative that you take appropriate steps when completing the conversion to a nonprofit organization.
Other People Are Reading
Instructions
-
-
1
Determine whether your business can qualify as a nonprofit organization. Not all businesses can qualify as a nonprofit organization, as charitable organizations need to serve the public good, such as social service organizations, educational groups and religious organizations.
-
2
Begin with your business plan and make sure that you can outline your goals and objectives. Determine what about your business would make it more beneficial as a nonprofit than a for-profit entity. Outline the mission, pursuits and potential funding sources for your organization.
-
-
3
Start the incorporation process as a nonprofit organization with the state government. Contact your state government to see if you need a new employer identification number (EIN). In most cases, you will need a new number. You will need to write bylaws, which are the rules of your organization. These also define the size of the board and how the organization will function, as well as the roles, duties of directors and officers, and how meetings will be held. Nonprofit bylaws also introduce how grant money may be distributed. Articles of incorporation is a document filed that contains an organization's basic information, such as the name, office address and tax-exempt data. File this paperwork with the secretary of state.
-
4
Submit the approval from the secretary of state with your bylaws and articles of incorporation to the IRS, along with your request for tax exempt status. The IRS will require a letter that discusses the changes that prompted the change from a business to a nonprofit organizational status. The IRS will review your application and determine whether it is complete. If it requires additional information, you may need to supply additional paperwork. The entire application process may take three to six months to complete.
-
1
Tips & Warnings
If you want to convert your business, you may need to consult a lawyer to help you with the incorporation process.
Do not claim that you are a nonprofit organization until you have received final approval from the IRS.
