Ready to get started with your nonprofit application? This guide will help get you started.
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by Belle Wong, J.D.
Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...
Updated on: January 25, 2023 · 5 min read
Starting a nonprofit can seem like a long and complicated process, and indeed, some of the steps involved in starting and running a nonprofit organization can at times be more complex than those involved in setting up and maintaining a regular for-profit business.
Despite this, forming your nonprofit and putting together an IRS nonprofit application is still something that you can do yourself.
While there are certain things you will be doing differently than the owner of a for-profit business, when you're forming a nonprofit you are still starting a business and, aside from the 501(c)(3) application, many of the steps required are similar to the steps any general business owner will need to go through in order to set up a new business.
As with any business, selecting the right niche is important for a nonprofit business. Do your market research beforehand: is your niche unique and original? Is there a need for your niche?
Just like a for-profit business, having a well-prepared business plan is essential to the nonprofit business. A nonprofit's business plan will be key to obtaining funding from donors and also from various government agencies. Because of this, it's important to take your time when drafting and finalizing your business plan.
If you intend to apply for tax-exempt status, you will need to incorporate your nonprofit business. Incorporation isn't usually a difficult process, and generally consists of the following:
Once you've properly registered your nonprofit corporation with your state, you will need to apply for an Employer Identification Number (EIN). You will need an EIN even if you don't intend to employ anyone, as it will be required on the form you'll be submitting to the IRS when you apply for tax-exempt status.
In order to be eligible to apply for exempt status under section 501(c)(3), your nonprofit business will need to have an appropriate legal form—that is, it must be a trust, a corporation or an association. If you've properly completed the incorporation step outlined above, your nonprofit organization should meet this requirement. Your nonprofit should also have an exempt purpose. For more information, the IRS has set out the full exemption requirements for 501(c)(3) status here.
You will need to submit a completed, signed, and dated application, along with the appropriate user fee. Nonprofits applying for 501(c)(3) status will be required to complete a Form 1023-series application while those applying under 501(a) should complete and file a Form 1024. Smaller nonprofits applying for 501(c)(3) status may be eligible to file Form 1023-EZ, which is a simpler, more streamlined version of Form 1023. Note that you will need to provide your EIN on the first page of your application.
If your nonprofit organization is new you will need to provide financial statements for the current year and proposed budgets for the next two years. For section 501(c)(3) organizations this information should be provided in Part IX of Form 1023.
If a third party will be representing you, you will need to complete Form 2848, Power of Attorney and Declaration of Representative. By completing this form you will be authorizing the third party to represent you.
If you are submitting a Form 1024 (a section 501(a) application), you will also need to fill out Form 8718, User Fee for Exempt Organization Determination Letter Request, along with the required user fee.
You will need exact copies of your nonprofit's organizing documents—that is, your articles of incorporation.
Once you've completed the forms required, submit your application by mailing in the completed, signed, and dated forms, along with the required fees.
Most states will automatically grant tax exemption status if you've received federal tax-exempt status; however, some states require you to apply separately for state tax exemption. If your nonprofit is located in such a state, you will need to submit a separate application for state tax-exempt status.
As with any for-profit corporation, your nonprofit organization will need a set of corporate bylaws.
Note that if you live in a state which requires the names of directors to be listed in the articles of incorporation, you will have to complete this step prior to filing your articles of incorporation. Once you've appointed your initial directors you can hold your first board meeting.
Just like a for-profit corporation, your nonprofit will have to obtain any required licenses and permits before it begins operations; the licenses and permits required will vary depending on your state and local government. The Small Business Administration maintains a list of links to state business license offices.
Your nonprofit business will need its own bank accounts. Check with your bank to see what documentation is required in order to open a bank account with them.
Starting a nonprofit has more steps than starting a corporation or LLC, especially if you’re applying for tax exemption. With hard work and attention to detail, you can get your application completed by yourself.
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