For many starting out, establishing your 501c(3) status is a huge mystery.

First and foremost, it is completely do-able. Do not let the I.R.S. intimidate you. And, I do not think you need an expensive lawyer to file it for you, either. (Unless you already those kind of funds available to you.)

You can do this. But before you even start reading this article, FOLLOW THIS ONE INSTRUCTION: Read this entire thing before you even incorporate with your State.

Why?

Because the I.R.S. demands certain language to be used in your state organizing documents! Most people don’t know that and haphazardly file their documents only to have to file amendments to their incorporation later. And usually there is a cost to that.

SO, read this entire article. Read through all of the links. Only when you understand what needs to be done thoroughly should you do your first filing with your state.

Without further ado,..

What Is Really Going On?

Here it is:

You incorporate through your state. (Remember, you pay SALES tax to your state. You do business as an entity recognized within your state!)
You file for an INCOME Tax ID through the I.R.S.

If you are a person, you get a Social Security number.
If you are an entity, you get an Employee Identification Number (E.I.N.) or Tax Identification Number (T.I.N.)

Just so you know, any organization (corporation, or incorporated entity; they’re all similar things) will need an E.I.N. or T.I.N.

So, to recap:

Incorporate with your State.
File for an EIN through the I.R.S.

Fortunately, the I.R.S. is a detailed organization. To find out how any non-profit opens, exists, and closes (step-by-tortuous-step), go here.

Why Do you Need One?

Well, for starters, it is difficult to justify taxable donations without being recognized as a non-profit with the I.R.S. This is a huge incentive for your donors, especially if you will be going for donations from people in larger amounts. They will want their deductions!

Second, to make sure that the entity (your non-profit) is not being taxed as a corporation you need this filing. You have to put the I.R.S.’s mind at ease that the activities you are participating in are not for personal benefit. If they sniff that it is, (or, if it becomes that way in the future!) they will put the smack down and tax you as a for-profit. They could even go back and demand you pay up the taxes you would have paid being a for-profit from the start.

Simply put, don’t mess with this.

What IS a 501c(3)?

In the most simple terms, Section 501 of the Tax code, point C, sub-point 3 defines the activities that can (and cannot) be done as a non-profit. We can debate on whether or not the I.R.S. should be able to limit you some other time, this is the way it is. Deal with it.

There are OTHER types of non-profits. There are 501c3′s, 4′s, 5′s & 6′s. Again, check with your lawyer or advisors for input on what you are. Check out an overview here.

How Long Should It Take?

Basically, on average it takes about 6 weeks. It took us about a month.

• A week to be sure the document was filled out correctly.
• 4 weeks with the I.R.S.
• 1 week for mail to and from.

Is There a Cost?

Yes. Don’t let nobody tell you different. (That, again, is not legal advice.)

It cost us about $700 one time fee. If you have to correct the application more than once you will have to pay ANOTHER $700.

Don’t worry, though. If there is something they do not like, you will get a letter from them fairly quickly that lays out, line by line, what should be corrected.

My Best Advice

Be thorough.

If you are not a detail person, recruit a detail person to ask you tough questions and read the document over again and again until THEY are satisfied that you answered all of the questions.

1. Write your incorporating papers using the I.R.S.’s language here!

2. FILE your incorporating papers with your state.

3. WAIT for response.

4. When incorporated with your state, print out the I.R.S. Form 1023.

5. READ IT THOROUGHLY!

Take your time here. With your eyes on the long-term success of your non-profit, take all the time required here to understand the nature of a non-profit from the government’s eyes. No matter how you may feel about the government’s involvement, they are there. Learn it, understand it.

6. Fill it out COMPLETELY.

7. Mail it in with the check made out for $700.

8. Wait. It’s tough, I know, but just wait. Work on other stuff. You KNOW that having a non-profit keeps you busy with other stuff.

9. If they have edits, again, TAKE YOUR TIME! If not, you should be up and running and ready for business!

* – This should not be construed as legal advice. We are not lawyers. We are the CPI Guys. That means we are hoping to provide valuable answers to you all. Be sure to consult a lawyer or the I.R.S. for questions regarding incorporating and filing for your non-profit status.

For direct helping filing your non-profit paperwork, contact us.