What is a 501(c)(3) and How Do You Start One?

When it comes to charitable organizations in the U.S., few terms are as significant as “501(c)(3).”

It's a reference that may sound mysterious, but its importance in the nonprofit sector can't be overstated.
I was a huge milestone for us when North Shore Helpers officially achieved this designation.

If you've ever considered starting a nonprofit or just been curious about what the term means, this post
will offer a concise overview.

What is a 501(c)(3)?
Simply put, a 501(c)(3) refers to a specific tax-exempt status granted to charitable organizations by the
Internal Revenue Service (IRS).

Organizations with this status do not have to pay federal income tax on their revenue, and donations
made to them are typically tax-deductible for the donors. This provision is crucial as it incentivizes
charitable giving and helps nonprofits thrive and serve their communities better.

There are various types of organizations that can qualify for this status, including:

• Religious institutions
• Educational entities
• Charities
• Scientific organizations
• Literary groups
• Animal welfare groups
• Child or family welfare organizations
• And more

How Do You Start a 501(c)(3)?
Starting a 501(c)(3) is a multistep process, and while it can be challenging, the rewards of creating an
organization that can positively impact communities are vast. Here are the steps to establish one.

• Identify Your Mission and Purpose: Before diving into paperwork, define what your nonprofit aims to achieve. This mission will guide all your actions and is crucial when applying for tax-exempt status.
• Create a Name and Legal Entity: Choose a unique name for your nonprofit and register it inyour state. Most nonprofits are established as corporations, but some states also allow trusts or associations.
• Draft Bylaws and Appoint Directors: Bylaws are the rules that dictate how your nonprofit operates. They cover topics like the roles and responsibilities of directors, meeting protocols, and membership details. At this stage, you should also appoint an initial board of directors, crucial for decision-making and governance.
• File Articles of Incorporation: Submit articles of incorporation to your state's appropriate department. This step legally establishes your nonprofit and provides the foundation for applying for 501(c)(3) status.
• Obtain an Employer Identification Number (EIN): Even if you don’t have employees, an EIN is necessary. You can obtain it from the IRS either online or by submitting Form SS-4.
• Apply for 501(c)(3) Status: This is the pivotal step. Fill out and submit IRS Form 1023 (or Form 1023-EZ for smaller organizations). This form evaluates your organization's structure, governance, and programs, ensuring they meet the criteria for tax-exempt status.
• Stay Compliant: Once you receive your 501(c)(3) designation, ongoing compliance is crucial. This means regular filings, adhering to your stated mission, maintaining transparency, and abiding by state-specific regulations.

Starting a 501(c)(3) is not a casual undertaking; it requires dedication, thoroughness, and a genuine
passion for your mission.
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Yet, the rewards – both in terms of community impact and fiscal benefits – make the process worthwhile.
Whether you're aiming to address educational gaps, environmental issues, or any other societal need,
understanding and obtaining the 501(c)(3) status is the first step toward making a lasting difference.