How to Form a 501(c)(3) Nonprofit Corporation

A school is an example of an organization that can be a nonprofit organization.

Forming a nonprofit organization allows you to perform a service or provide a product to those in need in your community or nation without expecting or receiving a profit. A 501(c)(3) nonprofit designation allows you to purchase various goods and services as well as receive payment and donations that are tax-free. The benefits of having a tax-free business cause the approval process to be somewhat lengthy for a 501(c)(3) designation.

Instructions

1. Determine the name of your nonprofit organization. The name of your nonprofit organization cannot currently be in use in the state in which you will be operating your nonprofit organization. Visit your Secretary of State website and click on the corporations section. Look for an entity search link and perform a search by typing in your intended nonprofit organization name. If no results appear for the business, most likely it is available for use.

2. Form a corporation that has exempt status. An exempt status business will be one that can choose to not receive a profit. For example, a school, charitable organization or church qualifies as an exempt status. Hire an attorney or certified public accountant to draft your articles of incorporation. Your articles of corporation is submitted to your Secretary of State informing them of the specific details of the corporation you are forming in the state. The articles of incorporation may include the name of the owners, the address and any shares that will be issued in the corporation. Access online articles of incorporation templates if you do not want to hire an attorney or certified public accountant. The fee for forming a corporation can be around $100 in most states.

3. Obtain a tax ID number from the IRS. A tax ID number is a nine-digit number that allows you to get credit for your business as well as open accounts and hire staff. There is no cost for a tax ID number. Visit the IRS website to apply for a tax ID number online or contact an IRS agent by phone at 800-829-1040.

4. Fill out IRS Form 1023 to apply for a 501(c)(3) status designation with the IRS. The IRS requires that you have a properly formed corporation before accepting your application for 501(c)(3) designation. Your fees for receiving a 501(c)(3) status will be based on the gross receipts that you receive for your business. If you are unsure of your gross receipts (revenue) choose a smaller amount initially (See Resources).

Tips & Warnings

• The process of forming a nonprofit organization can take several months, depending on the workload of the IRS as well as how accurate you are in filling out the documentation for your 501(c)(3) tax-exempt status.

References

• Managementhelp: Starting a non profit

Resources

• Irs: Form 1023
• Samplearticlesofincorporation: Articles of Incorporation template