So You Want to Start a Non-Profit?

This is a general list of steps and items needed in order to start a non-profit.  It is not all- inclusive as different jurisdictions and types of organizations may have differing requirements.  It is suggested that an expert in exempt orgainzations be consulted before proceeding.

The following is listed in order that they should most logically be completed:

1. Decide what the organization’s purpose and exempt activities will be and if it is going to be a 501(c)(3) charitable organization or other such as a 501(c )6) trade association.

2. Determine who will comprise the initial governing body and officers.  The board should have a minimum of 3 members and best of most are not related by family or business.

3. File articles of incorporation in your state or jurisdiction. If a 501(c)(3) charitable organization, it is important that the articles contain specific language required by the IRS in terms of charitable purpose and termination.  This filing is best done by an attorney with expertise in this area.

4. Once incorporated, obtain an Employer Identification Number (EIN) from the IRS.  This is a simple and quick process.

5. Develop and approve a set of bylaws- again, best practice is to use an attorney for this.

6. Develop and approve a conflict of interest policy (which may be part of the by-laws).

7. File an exemption application with the IRS:

a. Form 1023-EZ  if a charitable organization with anticipated gross revenue of $50,000 or less
b. Form 1023 for larger charitable organizations
c. Form 1024 for most non-charitable organizations such 501(c)(5) or (c)(6)
d. Fornm 1024-A for 501(c)(4) social welfare organizations

8. Note: these applications, except for the 1023-EZ, require a lot of information and it is best to have the application prepared or reviewed by a professional.  Approval times can very from 3-4 weeks to several months and the IRS may come back with questions before making a determination.

9. The organization my start operations during the period before a determination is received

10. Form 990 series returns are required from the date of incorporation to the end of the initial year even if the determination is not received in that period.

11. Some states and jurisdictions, such as DC and California require a separate state exemption application to be filed in order for the organization to be exempt in the jurisdiction.

12. If the organization is soliciting donations, there may be requirements to register for charitable solicitation in a state or several states. 

13. It is very important to file the Form 990 series return annually.  In addition to late or non-filing penalties, an organization that does not file these returns for three years in a row will have its exempt status revoked automatically and will have to re-apply for exempt statue and pay IRS filing fees again.