If you’re starting a nonprofit organization in Los Angeles, you’ll need to apply for 501(c)(3) tax-exempt status from the Internal Revenue Service (IRS) in order to gain the benefits that come with operating as a tax-exempt entity. Applying for 501(c)(3) status involves multiple steps and is a complex process that requires detailed preparation.

In order to help you navigate the intricacies of the 501(c)(3) application process, UpCounsel offers access to experienced business lawyers in Los Angeles who know the local regulations and can provide personalized counsel to ensure a successful application. With our platform, you can find the right lawyer for your unique needs and within your budget.

In this article, we walk through the main steps of the 501(c)(3) application process to help you learn what to expect and how best to prepare.

Before You Apply – Completing Your Organization’s Formation

Before you apply for 501(c)(3) status, the underlying organization must first be officially formed. Depending on where you’re located, this might be done through the California Secretary of State, the county clerk, or the local government.

If you are creating an organization, you’ll first need to file articles of incorporation and designate initial directors for the organization. Additionally, depending on the jurisdiction, some organizations may need to draft and submit a set of by-laws and may even have to declare the purpose for which they plan to use their 501(c)(3) status.

Once you’ve been made aware of any necessary steps, you can then proceed with filing for 501(c)(3) status.

Applying for 501(c)(3) Status Through the IRS

When you’re ready to apply, you’ll need to submit a 1023 form—also known as the Application for Recognition of Exemption Under Section 501(c)(3)— to the IRS. The form includes several sections where you’ll need to provide detailed information and make certain statements that are required for application.

When you’ve completed your form, you can either attach tax returns and any other supporting documents and mail it to the IRS or submit it electronically through the IRS’s website. Instructions on where to send the information and what documents to include can be found within the 1023 form itself.

In most circumstances, 501(c)(3) applications take anywhere between three months to a year to process. It’s important that your organization remain compliant with state and local laws, and forgo any activities that would prevent the IRS from granting it tax-exempt status during the application period.

For Some Organizations, Additional Documentation May Be Required

For organizations incoming from outside of California or those with a particularly complex application, additional forms and documents may need to be submitted. These include a special 2553 form if your organization wishes to be considered a “subchapter s corporation” and write a “letter ruling” requesting formal recognition from the IRS.

One thing to note is that obtaining 501(c)(3) status through the IRS can be a difficult and time-consuming process. Fortunately, UpCounsel’s network of Los Angeles business lawyers can provide counsel and guidance throughout the entire application process to ensure your organization is compliant and the application is competitively submitted.

The Benefits of Obtaining 501(c)(3) Status

One of the main advantages of obtaining 501(c)(3) status is that it enables your organization to become eligible for the many opportunities and benefits available to tax-exempt organizations, including access to competitive grants, as well as tax-exempt donations and contributions from public charities and individuals.

Organizations that are granted 501(c)(3) status also become eligible for certain tax deductions and may be eligible for reduced shipping, telephone, and credit card processing rates. In addition, there are certain employment-related benefits, such as director’s and officer’s liability insurance.

Getting Started

Getting your organization approved for 501(c)(3) status requires a great deal of preparation, but the benefits that come with achieving such recognition can be invaluable. To get started, the first step is forming the underlying organization.

From there, you can submit the 1023 form along with all necessary documentation and attachments to the IRS. If you have any questions throughout the application process or need help with learning about of the benefits of 501(c)(3) status, be sure to consult a knowledgeable and experienced business lawyer in Los Angeles to understand the full extent of what a 501(c)(3) can offer.


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