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Starting a 501(c)(3) Nonprofit Organization

A 501(c)(3) organization is defined under the tax code as a charitable organization and may raise money for charitable purposes. The IRS restricts how much fundraising can be done, by whom and for what purpose. For instance, the IRS will impose an excise tax if a principal member of the nonprofit unduly uses his position to raise money. Furthermore, the IRS sets parameters regarding a charitable nonprofit engaging in political activities such as raising money in support of a particular candidate.


Difficulty: 3

Step 1

Incorporate a new business. Have an attorney write the Articles of Incorporation for a new business. In the alternative, you can use an online legal document production service such as Legal Docs or Legal Zoom. The articles name the primary managers and owners of the business, name the register agent--the person who receives legal documents on behalf of the company--and states the purpose of the business and its products or services.

Step 2

Name the board of directors and define the nonprofit's mission statement. Name managers and/or owners of the corporation to serve on the board of directors in the Articles of Incorporation and then file the articles with the secretary of state or division of corporations. In addition, some states require a mission statement be written for corporations seeking tax-exempt status or those engaging in charitable work.

Step 3

Apply for a federal Employer Identification Number. Go to the Internal Revenue Service's website and apply for a taxpayer ID number or EIN. Complete Form SS-4 or use the IRS's "Interview-style Application" and obtain an EIN.

Step 4

Complete and file IRS Form 1023. Download the PDF of Form 1023, known as an "Application for Recognition of Exemption" directly from the IRS's website, complete the form and return it for processing to the Internal Revenue Service, P.O. Box 12192, Covington, KY 41012-0192.

Step 5

Determine your state's tax exemption status rules. Contact your secretary of state or state tax collector or comptroller's office and ask what tax exemptions are allowed for nonprofit organizations and which forms need to be completed and filed.



Article Written By Owen E. Richason IV

Owen Richason grew up working in his family's small contracting business. He later became an outplacement consultant, then a retail business consultant. Richason is a former personal finance and business writer for "Tampa Bay Business and Financier." He now writes for various publications, websites and blogs.