501 c 3 nonprofit organization

Simple Steps to Register Your 501(c)(3) Nonprofit Organization

Communities are enriched by nonprofit organizations. Some may even consider them to be the lifeblood of the community. They are responsible for many humanitarian efforts such as programs that aim to combat hunger, homelessness, education, medical aid for humans and animals, and even religious and spiritual needs. However, such a noble endeavor is not easy to set up.

Registering a standard business is already a complex process, but you’ll discover that there are more hoops and obstacles to get through when registering a nonprofit organization. However, registration is crucial as it legitimizes your organization and allows it to have all the benefits it can get.

In this article, we’ll discuss the benefits of registering a 501(c)(3) nonprofit organization and the process to do so.

What is a 501(c)(3) Nonprofit Organization?

Nonprofit organizations are charitable groups and private foundations that are exempt from federal taxes under Section 501(c)(3) of the United States Internal Revenue Code. According to Title 26 of the United States Code, section 501(c)(3), 501(c)(3) organizations are companies, trusts, unincorporated associations, or other forms of organizations that are tax-exempt. 

Organizations must be classified as charitable by the IRS in order to earn a 501(c)(3) designation, this means that they must be humanitarian or charitable in nature.

How to Register Your Nonprofit Organization

An organization’s registration process may vary according to the area in which it is located. You must ensure your nonprofit is legally registered and compliant regardless of whether you want to form one or have already done so. Below are the steps to form a compliant nonprofit org:

Choosing a Name

The first step in designing your firm is to choose a name. It is necessary to make sure that the name is not already trademarked or otherwise unavailable for use. Check with your Secretary of State and the U.S. government. The Department of Commerce website should be accessible to verify this. If you have not filed your articles of incorporation yet, you will usually have to pay a fee to reserve your name.

Establishing your Board of Directors

A board of directors should be created prior to incorporation. The incorporation form may be required in some states, but not all. At least three directors must also be listed in your 501(c)(3) application. It is preferable that these individuals are not related to you by blood or marriage. 

Document Articles of Incorporation

To incorporate an official company for your nonprofit, you will need to file these documents with your secretary of state. They contain crucial information such as the name, address, board of directors, mission, and goals of your nonprofit. Despite the fact that this process does not make your nonprofit exempt on its own, the articles of incorporation will need to include certain language for filing for tax-exemption later. The relevant information should be included with your state’s nonprofit formation packet. The incorporation notice must additionally be published in the local newspaper in certain states.

Create Bylaws

As soon as your articles of incorporation are approved, you can create your bylaws. These are rules and specifications for your nonprofit’s operations, including how elections are conducted, how officers are chosen, and when issues are held. A copy of your bylaws must be included in your 501(c)(3) application.

Meet with the Board

A board meeting is the first step to incorporating your company, establishing bylaws, and electing executive officers. Every minute of the meeting must be recorded. This first meeting should take place before you apply for federal tax-exempt status. Tax exemptions received from federal and state governments can be reported later in the meeting.

Apply for an EIN

Get an Employer Identification Number (EIN) before submitting an application for 501(c)(3) status. Regardless of whether you have employees or not, you need to do this in order to obtain tax-exempt status. To track your company’s financial activity, the IRS uses your EIN. Your company will need an EIN in order to open a bank account and hire staff. You must submit Form SS-4 to the IRS in order to obtain an EIN.

Apply for Tax Exemption

Now that your organization has been incorporated, bylaws drafted, and an EIN assigned, it’s time to apply to the IRS for federal tax-exempt status. Most states require you to apply for tax-exempt status at the federal or state level, but some require you to do both.

In order to request federal tax-exempt status, Form 1023 must be filed with the IRS. You may complete the 3-page 1023-EZ application, in lieu of the 26-page standard 1023, if your organization has gross income and assets of less than $50,000 and $250,000.

Apply for Business Licenses and Permits

Obtaining tax-exempt status is only the first step toward raising funding. Prior to opening your business, you will need to ensure that all business licenses and permits requirements relevant to your state and business operations are met.

What Are The Benefits Of Registering A 501(c)(3) Nonprofit Organization?

It’s entirely possible to operate as a nonprofit organization without an official registration, but you won’t be getting the full extent of what you can have when you register. 

The benefits you can get with registration are:

  • Access to Grants – Nonprofit organizations are eligible for many business grants.
  • Crowdfunding Eligibility – As long as you have 501(c)(3) certification, you can raise funds through nonprofit crowdfunding websites. Several platforms waive the platform costs for registered charities.
  • Legal Protections – Directors and members of nonprofits don’t have to be personally liable for the organization’s debts or obligations since they have limited liability protection.
  • Credibility – Donations will likely be more and larger once nonprofit status is achieved. You also appear more professional and legitimate.
  • Access to Discounts There are a number of discounts available to registered nonprofit groups.
  • Tax Benefits – If your organization is granted federal and state tax-exempt status, it will be exempt from paying income taxes.

Conclusion

The nonprofit sector contributes a great deal to the world. However, if they are unregistered, it can limit what they are able to do. In order to establish a nonprofit, you will need to do some legwork, but your charity and cause will benefit in the end. By incorporating as a nonprofit organization and obtaining 501(c)(3) status from the IRS, a charity organization can avoid paying income taxes on funds it receives, and it can receive alternative funding from the government or through crowdfunding platforms for charitable causes. In addition, since donations to IRS-registered charities are tax-deductible, donors are more likely to support those organizations.

Save Time, Money, & Resources

Categories: Nonprofits

Get Started

Ready for the ultimate credit card processing experience? Fill out this form!

Contact HMS

Ready for the ultimate credit card processing experience? Ask us your questions here.