Non-profit organizations give big gifts in small packages. Men’s and women’s organizations, senior citizen clubs, friends of the local library, religion-based charities, all these and more bring something special to our lives and the lives of others in our community.
To do so, these groups need to raise money, and to raise money, they need to offer donors something in return for their generosity. The biggest attraction to contributors is a tax deduction that can only be claimed if the organization has IRS 501(c) 3 status.
As you might expect the Internal Revenue Service has set up some hurdles to examine and validate your organization’s claim to being worthy of the tax deduction. It is a process that takes time and some expense. But, it will mean all the difference to your organization in terms of marketability, governance, and accountability.
1. Pick a Name.
• Pick an original name. It cannot appear as the name of any other group listed with the State’s corporation division.
• Explore your State’s website to see if your name is already in use.
• Do what you have to in order to reserve the name until you file your forms.
• Hire an attorney who has some specialized experience.
• Write a Mission Statement identifying your goals, values, and services.
2. Prepare and Submit the Documents Required.
• Prepare Articles of Incorporation. This is hard to do, so give this assignment to your lawyer.
• Complete the documents required by your specific state available at the designated State office.
• Secure a Federal Employer Identification Number (EIN).
3. Consult with a Certified Public Accountant (CPA).
• Collaborate on creating a budget for the next two years.
• Organize a financial and corporate record-keeping process.
• Introduce an accounting system that complies with state and federal requirements.
• Build checks and balances into accounting system.
• Open a bank account.
4. Apply for Tax Exempt Status.
• Complete and submit Form 1023 or 1024 according to instructions in Publication 557.
• Attach Financial Statements and budgets for the coming two years.
• Designate a Power of Attorney.
• Repeat the process as instructed for state and local exemption.
5. Open Your Doors After Receiving a Letter of Determination.
• Prepare a Constitution and By-Laws with your lawyer’s help.
• Establish a Board of Directors.
• Comply with rules on fundraising regulations of city and state.
• Begin Your Marketing Campaign.
• Contact the U.S. Postal Service for mail permit.
• Design a logo for stationery.
• Reserve a domain name and create a website.
On smart thing is to include the words “an IRS 501(c) 3 tax exempt organization” on everything you print. It serves as a constant reminder that there is a tax benefit to contributing to your organization. In addition, it is an endorsement of sorts. It makes a claim to the reader that your organization is in compliance with the law, is overseen by a Board of Directors, and is built on checks and balances that hold the Officers accountable for the proper distribution of revenues.