How to Become a 501c3: Everything You Need to Know
Thinking about how to become a 501c3 can seem like a daunting task. 4 min read
2. Decide on a name for your organization
3. Develop a Mission Statement
4. Form a Board of Directors
5. Develop the Articles of Incorporation
6. How to file a tax exempt public charity status
7. Other Miscellaneous Checklist Items
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Thinking about how to become a 501c3 can seem like a daunting task. However, once you break it down into a checklist of items to complete, it will seem much more feasible.
Decide on a name for your organization
Here are some general guidelines to help you with choosing a name for your organization:
- The name cannot be identical to the name of any other corporation on file with your state's office. You can verify with the state to check via their website or call their office to see if the organization name you have chosen is available
- The organization name should end with corporate designator such Corporation (Corp.), Incorporated (Inc.), or Limited (Ltd.).
- The name should not contain designations reserved for the state like Federal, National, United States, Reserve, Cooperative, or Bank.
Once you’ve chosen the name and made sure it’s available, you can reserve the name by paying a small fee until you have filed your Articles of Incorporation.
Develop a Mission Statement
To develop a mission statement, you’ll want to summarize what your organization’s purpose is, who it will provide services for, and where the services will happen. The Mission Statement should provide this information in a clear and concise written statement consisting of one to two sentences. A mission statement should be powerful, as you will use it in most published materials, marketing information, and funding requests.
Form a Board of Directors
You will need to determine how your Board of Directors will be constructed. Identify the special skills and qualities you need on your board, and determine the types of individuals you will be pursuing. The individuals on your board should share a common interest and passion for the services your organization will provide. The board members should be those who will support the organization with their knowledge, talents, time, and fundraising efforts. The group will need to be cohesive enough to help translate ideas into practices through their planning and fundraising efforts.
Once you determine the type of board members you are looking for, you’ll want to seek out areas to advertise for prospective board members. Social media, religious groups, social service providers, legal professionals, and colleges/universities might be a good starting place.
Another important factor to consider are the number of people who will serve on the board. This number is usually determined by the needs of the organization, though some states have regulations that mandate the minimum number of board members (which is typically 3, 5, or 7).
Develop the Articles of Incorporation
The Articles of Incorporation makes the organization the holder of the debts and liabilities, therefore it protects the Board of Directors and employees from legal liabilities. The requirements on how to develop the Articles of Incorporation are determined on a state level and you can obtain your particular state’s requirements by contacting your state’s Attorney General Office or the Secretary of State’s office.
Some states may refer to the Articles of Incorporation by a different name like a Corporate Charter or Articles of Association.
How to file a tax exempt public charity status
Your organization will definitely want to take advantage of filing for a tax exempt public charity status, if eligible. Use an experienced attorney to identify the opportunities for tax exempt statuses for your organization. You may need to apply for exemptions from income, sales, and property taxes according to state and county laws.
For federal tax exemption, you can apply by completing an application Form 1023 and publication 557 from the local IRS office. There may be a filing fee depending on the size of the organization’s proposed budget. Once the application has been completed, you send through regular mail to the Internal Revenue Service, P.O. Box 12192, Covington, KY 41012-0192. If you application is sent through express mail, it should be sent to Internal Revenue Service, 201 W. Rivercenter Boulevard, Attn: Extracting Stop 312 Covington, KY 41011(4).
Other Miscellaneous Checklist Items
- Research the insurance needs of your organization. Be sure to obtain directors’ and officers’ liability insurance, and any other insurance coverages you may need.
- Apply for an employer identification number (EIN) from Internal Revenue Services.
- Register with the state unemployment insurance bureau if your organization will have employees.
- Obtain a nonprofit mailing permit from U.S. Postal Service.
- Utilize a Certified Public Accountant with 501c3 experience to assist with setting up any financial requirements. Develop a budget and establish the financial oversight of items like fundraising and income, including the accounting system you will use.
- Develop the bylaws in the early development of the organization that can include rules and procedures for holding meetings, voting on issues and electing directors and officers.
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