Obtaining A 501(c) (3) Tax-exempt Status For Your Non-profit Organization – The Steps

If you’re interested in forming a non-profit organization, even after you’ve incorporated, getting that tax-exempt status is one of those most crucial steps in setting up a non-profit company. Majority of the real benefits of being a non-profit organization come from your 501(c) (3) tax-exempt status such as access to grant money, tax deductibility and property and income tax exemptions.

If you’ve been wondering of applying for tax-exempt status, you should complete IRS Form 1023, which is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. You might find it intimidating to complete the form as the tax and legal technicalities which are there needs clear comprehension. Read on the concerns of this article to know more on the steps you have to take to form a non-profit organization.

  • Select a name: Remember that you need to choose a unique name and the name of your no-profit organization shouldn’t be the same as another corporation. It should end with a corporate designator like ‘Incorporated’, ‘corporation’, ‘Limited’ or might be the abbreviation of these words. You can find out with the state’s corporation office to know whether or not the proposed name is there for you or someone else has already taken it.
  • Articles of incorporation need to be filed: You have to file ‘articles of incorporation’ with the corporation filing office. Here you have to fill in some basic information like office address, name of non-profit and few others. You have to include a definite language to make sure you receive tax-exempt status.
  • Apply for tax exemption with the IRS: The most obvious step is to submit a federal 501(c) (3) tax exemption application with the Internal Revenue Service. In order to apply, you have to complete IRS Package 1023 as without that, it is almost impossible to file the same. The smaller non-profit organizations have to file 1023-EZ and this is a simpler application form which you can complete online.
  • State tax exemption has to be applied for: This step doesn’t apply to non-profits in all states but in few states, you may have to complete a separate application to receive state tax exemption. In some other states, if you have to obtain tax exemption, you have to send over a copy of the IRS determination letter which granted your federal exemption. Contact your state tax agency to know the steps you should take.
  • Get permits and licenses: Check with your state department of consumer affairs for information regarding state licensing requirements for the type of organization you have. In case your company sells off things, you will need a sales tax permit and you may also need a zoning permit.

Therefore, if you’re eager to form your own non-profit organization, you can take the above listed steps. You may also check out TaxExemptWorld.com in order to know more on the list of non-profit organizations and detailed information on each of them. You’ll also get to know the rules you have to follow.