The Power of 501c3
In order to obtain major funding and tap into billions of dollars in private or public grants, faith-based and community organizations must have a 501c3 designation. This page contains excellent information about the 501c3 including what it means and how to apply. Be sure to register for the free webinar titled “the Power of 501c3”. Urban Awareness USA offers dozens for free helpful webinars are conducted by Tracy J. Brown and the Urban Awareness USA team of career professionals. Urban Awareness USA provides Faith-Based & Community Organizations resources, tools and tips to help them positively impact their communities.
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“THE POWER OF 501c3”
What is a 501(c)(3)?
Simply put, a 501(c)(3) organization is a type of nonprofit corporation classified by the IRS as either a “public charity” or a “private foundation.” Within those two broad categories, a 501(c)(3) is further designated as one or more of the following:
Religious, Educational, Charitable, etc.
Can a nonprofit make a profit?
Yes and no…What distinguishes nonprofits is not whether they can make surplus income, but rather what is done with any “profit.” A for-profit company that generates net revenue can choose to distribute those profits to owners and shareholders, executives, and employees. Nonprofit organizations don't exist to earn money for owners, stakeholders or employees. In fact, distribution of profits is strictly prohibited, and must be used to further the mission of the organization. This distinction, not the ability to generate a profit, is a major difference between nonprofits and businesses.
Can a nonprofit give and receive tax benefits?
As a result of its qualification as a 501(c)(3) organization, this type of nonprofit is able to receive tax-deductible charitable contributions from supporters, and is exempt from business income and property taxes.
How do I obtain 501(c)(3) Status
To apply for recognition of tax-exempt, public charity status, obtain Form 1023 (application) and Publication 557 (detailed instructions) from the local IRS office. The filing fee depends upon the size of the organization’s budget. The application is an important legal document, so it is advisable to seek the assistance of an experienced attorney when preparing it. Both of these documents can be downloaded from IRS web site at http://www.irs.gov/charities/index.html.
It is important to file your 1023 within 15 months of the date when your organization was established, or when your Articles of Incorporation were filed. Although the IRS
automatically provides a 12-month extension, missing the deadline may result in your
organization not receiving recognition as a private foundation.
Does an nonprofit need to file for a “local exemption”?
Yes. In accordance with state, county, and municipal law, you may apply for exemption from income, sales, and property taxes. Contact your state Department of Revenue, your county or municipal Department of Revenue, local Departments of Revenue, and county or municipal clerk’s offices.
How to Start a 501(c)(3)
Now that you know what a 501(c)(3) is, the question now is, "How do I start a nonprofit, 501(c)(3) organization?" On this page we have provided and overview of the steps you must take to both obtain your 501c3 as well as the preliminary steeps you must take if you wish to be taken seriously by major funding providers:
Formulate a mission statement
As a non-profit organization, you exist to accomplish your mission, which should be crafted based upon your purpose, services and values. The mission statement is a concise expression that covers in one or two sentences who the organization is, what it does, for whom and where. It should also be compelling, as it will be used in all published materials, funding requests and public relations.
A mission statement is often most powerful when it states not only what you do, but what you expect to accomplish through your organization’s work. It should also portray how your organization is distinct from others. The Board of Directors should vote to officially adopt the mission statement.
Form a Board of Directors
Forming a board requires careful thought and extensive recruitment efforts. Each state has regulations that determine the minimum size of the board, typically three, but the optimum number of people who sit on the board should be determined by the needs of the organization.
Based on what your organization would like to accomplish, you should decide what special skills and qualities you will require of the individuals on your board. The next step is to identify qualified individuals who are supportive of your mission and are willing to give of their talents and time.
File articles of incorporation
Articles of Incorporation are an official statement of creation of an organization filed with the appropriate state agency. Articles of Incorporation are important to protect both board and staff from legal liabilities incurred by the organization, making the corporation the holder of debts and liabilities, not the individuals and officers who work for the organization.
The specific requirements governing how to incorporate are determined by each state. You can obtain the information you need to proceed with this step from your state Attorney General’s office or your state Secretary’s office.
Draft Bylaws.
Bylaws are simply the “rules” of how the organization operates. Although Bylaws are not required to file for 501(c)(3) status, they will help you in governing your organization.
Bylaws should be drafted with the help of an attorney and approved by the board early in the organization's development. The common format is as follows:
- The Name of the organization
- The Mission of the organization
- Membership (Responsibilities, Dues, Quorum, Voting Procedure)
- Board of Directors (Duties, Officers, Meetings)
- Committees
- Procedures for amending the bylaws
- Date bylaws were adopted by the board
Develop a strategic plan.
Strategic planning determines where an organization is going over the next one to three years, how it's going to get there and how it'll know if it got there or not. A strategic plan is not required by law, but your organization will run smoothly with one.
Develop a business plan.
Develop a budget
Develop a record keeping system
Legally, you must save all Board documents including minutes and financial statements. It is necessary to preserve your important corporate documents, including board meeting minutes, bylaws, Articles of Incorporation, financial reports, and other official records. You should contact your appropriate state agency for more information on what records you are required to keep in the official files.
Develop an accounting system
If your board does not include someone with a financial or accounting background, it is best to work with an accountant familiar with non-profit organizations. Nonprofits are accountable to the public, its funders, and, in some instances, government granting bodies, and it is vital to establish a system of controls (checks and balances) when establishing the organization’s accounting practices.
File for 501(c)(3) status
To apply for recognition of tax-exempt, public charity status, obtain Form 1023 (application) and Publication 557 (detailed instructions) from the local IRS office. The filing fee depends upon the size of the organization’s budget. The application is an important legal document, so it is advisable to seek the assistance of an experienced attorney when preparing it. Both of these documents can be downloaded from IRS web site at http://www.irs.gov/charities/index.html.
File for a Federal Employee Identification Number
Regardless of whether or not you have employees, nonprofits are required to obtain a federal Employee Identification Number (EIN) — also referred to as the federal ID number. Available from the IRS, this number is used to identify the organization when tax documents are filed and is used not unlike an individual’s Social Security number. If you received your number prior to incorporation, you will need to apply for a new number under the corporate name. Ask for Form SS-4 when applying for your EIN.
File for state tax exemption
File for local tax exemption
Fulfill charitable solicitation law requirements
If your organization’s plans include fundraising, be aware that many states and few local jurisdictions regulate organizations that solicit funds within that state, county, or city. Usually compliance involves obtaining a permit or license and then filing an annual report and financial statement. Contact the state Attorney General’s office, the state Department of Commerce, state and local Departments of Revenue and county or municipal clerk’s offices to get more information.
How Can Urban Awareness USA Help?
Nobody knows how to help Faith-Based and Community Organizations with fund development and the 501c3 process better than the experts at Urban Awareness USA. Our consultants are professionals who understand how to best position your community organization or ministry for success.
Urban Awareness USA is not a document filling service. We ARE strategic consultants and our goal is to help your organization reach its potential and positively impact the community. Our approach is to work with you, one-on-one, helping you properly structure your organization for long term success. Obtaining IRS approval for your 501c3 is merely one step in the journey of helping your organization reach its potential. And once you are approved, we provide ongoing fund development and organizational development services for our clients, to help you make a positive impact in your community.
Call our toll-free number and speak with one of our knowledgeable associates. There is no cost or obligation. We will be happy to discuss your plans and help you understand how the 501c3 process works as well as discuss how you can best position your organization for funding.
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FREE WITH NO OBLIGATION INFORMATION
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about your vision.
(866) 975-8722
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For more information, be sure and check out our blog, where we frequently post articles important to those running a nonprofit organization.
CLICK HERE TO DOWN LOAD A FREE HOW TO GUIDE:
“THE POWER OF 501c3”
We look forward to hearing about your plans and
to showing you how you can succeed!
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