Starting a non-profit organization is a great way to make a difference in your community. But, the undertaking is no easy feat — especially when it comes to gaining 501C3 status. From tax-exemption to fundraising, the US Internal Revenue Service provides several regulations you must meet and fulfill to obtain and keep this type of nonprofit status.

If you’re based in Chicago, you’ll have additional considerations to make for your 501C3 status. Understanding the ins and outs of your 501C3 status can help ensure you're in compliance with all regulations and maximize the resources you have available. To help, this article outlines the top 5 important points to keep in mind when taking on the task of obtaining and maintaining 501C3 status in Chicago.

First, the basics. 501C3 status allows non-profit organizations to take advantage of specialized tax benefits, including complete exemption from federal income tax, tax-deductible donations, and specialized recordkeeping. Furthermore, it gives non-profit organizations the credibility they need to apply for grants, solicit donations, and enjoy certain exemptions from state and local taxes.

So, what’s needed to qualify for 501C3 status? As the Internal Revenue Service (IRS) website details, you’ll need to meet certain organizational tests, activities tests, and asset tests. These determination can vary from one non-profit organization to the next, making it important to familiarize yourself with the IRS regulations and state and federal laws that may apply to your non-profit organization, especially in the city of Chicago.

Once your Chicago-based organization has had 501C3 status approved by the IRS, the work isn’t finished by any means. As the Non-profit Law Blog points out, having 501C3 status comes with a litany of regular and continuous responsibilities, such as the timely filing of taxes, the need to stay organized, the requirement that donations be approved by the Board of Directors, and the adherence of strict accounting and record-keeping requirements.

It’s also important to be aware of the potential ramifications of not fulfilling your 501C3 status requirements. According to The University of Notre Dame, failing to meet the IRS rules and guidelines can result in revocation of your non-profit’s status, along with various financial penalties.

Given the complexity of managing non-profits and obtaining 501C3 status, it’s often beneficial to enlist the services of an experienced attorney. This is especially applicable in the city of Chicago, as the business laws of the state and municipal laws may require some degree of legal interpretation prior to taking action.

Working with a qualified legal professional also comes with added benefits, such as expert advice on the tax exemption certificates, drafting of official documents, the filing of the annual 990 forms, and the understanding of how to legally take in donations.

Obtaining 501C3 status can be a time-consuming and daunting process, but it’s one that’s necessary for your organization to move forward in Chicago and access the resources it needs to make a difference. As the five points outlined above suggest, it’s important that you familiarize yourself with the regulations required by the IRS in addition to any applicable state and municipal laws. It's also beneficial to partner with a business lawyer that understands local regulations and offers comprehensive legal services to help you stay in compliance.


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