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15/03/2016 07:17:52 PM

How to Get Not for Profit Status

If you are considering starting a not for profit organization, there are specific steps needed to comply with the requirements that govern such entities. One of the defining features for your organization will be that you do not distribute equity, or profit, to any private individual. Not for profit organizations like educational, charitable or religious organizations can obtain federal tax exemption under Section 501(c)(3) of the Internal Revenue Code.

Initial Preparation

To start a not for profit organization, establish that there are no other entities -- nonprofit, for-profit or government -- conducting similar work in the community to avoid duplication. Develop a mission statement that addresses the issue you are tackling, such as education, charitable work, religion, research or another non-commercial endeavor. Choose a suitable name with the appropriate designator, such as Corp., Inc. or Ltd, and check availability with the state's filing office.

 

Obtain an EIN

Apply for a federal Employer Identification Number even if you do not have employees, to facilitate tax documentation. Application should be made using Form SS-4, Application for Employer Identification Number. This form also is available on the IRS website, where you can fill out and receive the EIN instantly. You will receive the official statement of your EIN later by mail at the address you provide.

Tax Exempt Status

To become tax-exempt, you have to apply for recognition of exemption from the IRS and supply evidence to show you meet certain requirements by filling out either Form 1023 or 1024. This form details your activities and provides other pertinent information that can be used to give you public charity status for tax purposes. You will need to attach your financial statements for the current year and provide forecasted expenses for the next two years. A fee is required, typically determined by your organization's budget.

Articles of Incorporation

You will need to file Articles of Incorporation with a state's corporations office. These place responsibility of debts and liabilities on the organization so that the board and staff are protected from legal problems. Necessary contents include a Purpose Clause that limits your operations to the stated cause and a Dissolution Clause that states how your organization’s assets will be distributed to the federal, state or local government for a public purpose when you dissolve.