How to Start a 501 C

Different types of 501(c)s require different IRS forms.

501(c) organizations enjoy tax-exempt status at the state and federal levels. While many people know of 501(c)(3) organizations, charitable groups allowed to receive tax deductible donations from individuals, many do not realize 28 different forms of 501(c) organizations exist. From black lung benefits trusts to veterans associations to cemetery companies, the Internal Revenue Service provides tax-exempt status contingent upon these groups organizing as a 501(c). Each type of 501(c) follows similar start-up steps to gain approval for tax-exempt status.

Things You'll Need

• IRS Form 1023 or IRS Form 1024

Instructions

1. Choose the proper type of 501(c) to form. Internal Revenue Service Publication 557, Tax-Exempt Status for Your Organization, outlines all types of 501(c) organizations allowed under federal law. Determine which category your organization falls under; common categories include 501(c)(3)s (charities allowing tax deductible donations from individuals) and 501(c)(7)s (social and recreational clubs).

2. Register a business name meeting state law requirements. Starting a 501(c) requires incorporating the organization within one of the 50 states. Select a business name for the 501(c) organization and check with the appropriate state's corporate filing office to determine name eligibility.

3. File Articles of Incorporation with the state's corporate filing office. The articles of incorporation officially establish the 501(c). Different states call the articles of incorporation by different names including Articles of Association, Trust Indenture, Corporate Constitution, Articles of Organization or the Corporate Charter.

4. Apply for tax-exempt status and recognition as a 501(c) with the Internal Revenue Service. The type of 501(c) organization formed determines which IRS form to file with the federal government. The IRS requires Form 1023, IRS Form 1024 or a letter; fill out the appropriate form and attached the documents indicated on those forms. Commonly, in addition to Articles of Incorporation, the IRS requires historical or projected financial data.

5. Write corporate bylaws to govern the new organization. Corporate bylaws establish corporate governance, the rules and regulations an organization must follow. Bylaws create rules for selecting board members, holding board meetings, voting on issues and changing the corporate charter.

6. Appoint a board of directors for the new 501(c) organization. Most states require 501(c) organizations to have a minimum number of board members; check with your state's corporate filing office for specific rules and regulations.

7. Convene the first board of directors meeting. The initial board of directors meeting allows the board to recognize tax-exempt status, elect officers of the 501(c) and oversee the initial business of the organization.

Tips & Warnings

• Employ a legal expert for help in filling out IRS Form 1023 or IRS Form 1024 to improve the chances of IRS acceptance during the first submission.

• Conducting business before the IRS grants tax-exempt status may result in taxes owed if the IRS does not grant status or seeks a revised application.

• IRS approval or rejection of a 501(c) organization takes significant time; plan accordingly.

References

• Cornell University Law School: U.S. Code
• Internal Revenue Service: Publication 557, Tax-Exempt Status for Your Organization
• Nolo: How to Form a 501(c)(3) Corporation

Resources

• Internal Revenue Service: Application for Recognition of Exemption Form 1023
• Internal Revenue Service: Application for Recognition of Exemption Form 1024
• Internal Revenue Service: Application for Recognition of Exemption