Frequently Asked Questions about Nonprofit Corporations

What is a 501(c)(3) public charity?

A 501(c)(3) public charity is an organization which has (1) been organized under state law, (2) which is operated in furtherance of a 501(c)(3) purpose (i.e. Charitable, religious, educational, scientific, etc), (3) it benefits an unidentified charitable class of people (ie. Those who suffer from AID’s), (4) its activities are not political in nature and (5) its support, one-third of which, must come from the general public. A 501(c)(3) purpose includes, but is not limited to, educational, religious, scientific, medical and charitable purposes.

How do I form a 501(c)(3) public charity?

First, at the very minimum, you must form a non profit corporation in your home state. Then, your organization must adopt bylaws and obtain an employer identification number. Upon completing this, you must then prepare and submit an application to the IRS to request for it to approve your organization as exempt under Internal Revenue Code Section 501(c)(3). Generally speaking, the process from start to finish may take anywhere between 3-6 months if you have done things properly and are diligent in your paperwork.

Which are the benefits of a recognized 501(C)(3) Corporation?

1. Contributions made to 501(c)(3)s at death are tax free and  exempt from federal taxation.
   
   
2. Income earned by the Non-Profit is Tax Free
   
   
3. The Non Profit has Perpetual Life so that Non Profit can keep on furthering its tax exempt purpose even after founders pass on.
   
   
4. Special Employee Benefits including sick pay, group life insurance, accident and health insurance, payment of medical expenses and coverage of pension plans.
   
   
5. Limited liability for directors, officers, employees, volunteers and members. This provides incentives to those asked to serve the organization whether on its board or otherwise.
   
   
6. Corporate formalities which enable the organization to provide a structure for decision making especially when disputes exist between individuals about the direction of the non profit.
   
   
7. Donors can make charitable contributions to your company and receive a tax deduction on their tax return and pay no taxes on this money.Donors may give property, money, stock and services. [Please note that Donors may not receive consideration (money, free dinner) in return for their donation. Otherwise, a full deduction may not be possible.]
   
   
8. 501(c)(3) status qualifies your nonprofit corporation to receive literally millions of dollars in private and public grant money which is given out every year. If you are not recognized as a 501(c)(3) Corporation, these foundations and philanthropic organizations will not even allow you to submit a grant (request) for money.
   
   
9. Being a 501(c)(3) will qualify your corporation for participation in literally hundreds of governmental programs operated by the Federal and State Governments of this country. The government will only allow nonprofit corporations with 501(c)(3) status to participate in these programs.
   
   
10. Cheaper Advertising Rates in publications
    
    
11. Lower Membership Rates to places like the Price Club.
    
    
12. Non profit employees can be eligible to participate in job training programs of federal and state government.
    
    
13. Lower Postal Rates on 3rd Class Bulk Mailing. (Contact your local post office)
    
    
14. Discounted space from internet service providers.
    
    
15. Free radio and PSA announcements provide by local media.

What is a “private foundation”?

Firstly, most people forming a private foundation will prefer to form a 501(c)(3) public charity mainly because the benefits are greater. Specifically, the main difference is a person donating money to a 501(c)(3) public charity can donate up to 50% of their adjusted gross income. With a private foundation, a person donating money can only do so up to 30% of their adjusted gross income.

The dividing line between being deemed a 501(c)(3) public charity or a private foundation is based upon the sources of support of the organization. In other words, if the organization’s sources of support are from a relatively few number of people then the sources of support will cause the IRS to deem the organization a private foundation. If the sources of support are large enough, the IRS will deem the organization to be a 501(c)(3).

What do you mean, “other types of tax exempt organizations”?

When we refer to “other types of tax exempt organizations” we are referring to certain organizations, such as business leagues, trade groups, social clubs and firefighter associations who qualify for tax exempt status but who do not qualify to be able to receive donations from donors which would be deemed a “charitable contribution” and a deduction to the individual tax payer as such.

How long does the process take?

Unless you choose to expedite, it takes approximately 4 weeks to incorporate and 3-5 months to be approved as a 501(c)(3).

Is it hard to be approved as a 501(c)(3) public charity, private foundation or other type of tax exempt organization?

Yes, and even more so if you have never done it before.

Do you provide guarantees?

We can never guarantee anything because we deal with governmental entities who may not share our opinion on a certain matter even if we are right. However, we can guarantee that we will act to the best of our ability and answer your questions in a reasonably timely manner.

How many board members do we need to have on our board?

Generally we suggest, and the IRS agrees, that there should be 3 unrelated board members. (Unrelated means by blood or marriage).

Can the officers of the non profit corporation be the same as the board of directors?

Yes.

What are the titles of officers?

Basic titles include: President, Secretary and Treasurer.

How many officers do we need?

Three (3).

Can the officers be the same people?

We think no.

Do we need to prepare a mission statement?

No. However, you may find it helpful for your internal operations.

Do we need to prepare a budget for our operations?

Absolutely. This is necessary and required to be reviewed in advance by the IRS.

As far being deemed tax exempt, do we need to do anything at the state or local level?

Most states automatically deem any recognized 501(c)(3) public charity as tax exempt under state law as well.

How do I order your 501(c)(3) Form Preparation Service?

Please visit the service page here or if you already did it, click here to start your order. If you have not yet incorporated as a nonprofit corporation in your state, please click here to obtain pricing and plans availables to you

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