Should You Form a Nonprofit, 501 (c)(3) or Charity?

There are several ways Bizee can provide help starting a nonprofit . But first, you need to make a few key decisions about your nonprofit to determine what kind of organization you want to create, what mission you want to pursue, and which formal structure of the organization is right for your goals.

There are a few kinds of tax-exempt nonprofit organizations, with slightly different IRS reporting and compliance requirements depending on the mission of the organization. Which sort of nonprofit do you want to be?

Charitable Organization: Charitable organizations are also known as 501(c)(3) organizations, and they are tax-exempt. That means people can donate money to your organization on a tax-deductible basis, and your organization is not required to pay federal income tax (as long as you maintain compliance with the IRS rules for tax-exempt organizations). Charitable organizations can be public charities or private foundations. Typically, your organization would need to be focused on a particular mission working to support certain “exempt purposes” that qualify for tax-exempt status.

Social Welfare Organization: Social welfare organizations are tax-exempt (the organization does not have to pay taxes), but donations to the organizations are not tax-deductible. These organizations are also known as Section 501(c)(4) organizations , and they include lobbying organizations or public advocacy organizations. If you want to raise money for political causes or lobby the government, you need a 501(c)(4) organization — and don’t promise your donors a tax break, because under the law they can't claim one on the money they donate to you.

Agricultural/Horticultural Organization: Many nonprofit organizations have a mission focused on agriculture and horticulture, and there is a special section of the IRS code for these groups, known as Section 501(c)(5) organizations . Will your organization be dedicated to improving the quality of crops or livestock, testing soil, promoting a particular breed of animal, exhibiting farm products or promoting agriculture with educational events? If your organization is focused on these agricultural exempt purposes , you can qualify for status as an Agricultural/Horticultural nonprofit organization.

Labor Organization: Another type of 501(c)(5) nonprofit is a labor organization. This is not necessarily the same as a labor union. But if your nonprofit is focused on the exempt purposes of helping a group of workers promote their interests, bargain collectively, secure better wages, improve their efficiency or secure better benefits and working conditions, then you should register your nonprofit as a Labor Organization.

Trade Association/Business League: If you want your nonprofit organization to be focused on promoting a particular trade or advance the interests of a common business interest or industry, you should form a tax-exempt trade association, also known as a business league or Section 501(c)(6) organization . Some of the exempt purposes of this type of nonprofit include promoting better business standards or methods, operating a trade publication for the benefit of an industry, promoting the use of the goods or services of a particular industry (not a specific business), and lobbying to advance the common business interests of the organization’s members.

How to Start a Nonprofit Organization

Once you have decided what type of nonprofit organization you want to be, it’s time to get help from Bizee. There are several ways Bizee provides help starting a nonprofit, including:

• Choose a name for your nonprofit: Having a clear, concise, memorable, and relevant name for your nonprofit organization can be essential in fundraising, marketing, and building an audience of supporters for your cause. Bizee can conduct a name search and trademark search to make sure your first choice of nonprofit name is available — getting your ideal name confirmed and locked in early can help you avoid trademark lawsuits and extra marketing costs in the future.
• File your Articles of Incorporation: Each state has its own unique requirements for forming an LLC or other corporation, and forming a nonprofit corporation is the same. You need to include the right details and meet the deadlines to make your organization “official” as a recognized legal entity for conducting charitable work or other mission-oriented organizing and activities in your state. Bizee is an ideal choice to help with this because of their experience with state-specific rules and regulations. It's best to get your Articles of Incorporation or other organizing documents filed accurately and correctly on the first try, especially if you are new to the world of running a nonprofit.
• Get approved for tax-exempt status: One of the most important aspects of starting a nonprofit is getting the organization approved for tax-exempt status — such as 501(c)(3) status for charities that want to collect tax-deductible donations. Bizee can make sure that your organization’s formation documents have the right wording to meet the IRS requirements and help you get approved for tax-exempt status. This is another aspect of forming a nonprofit that is very important to get right on the first try. You can avoid delays, confusion and added costs for your organization if you qualify for tax-exempt status immediately, which will also give you added credibility with donors and partners.
• Develop bylaws: Bizee’s nonprofit incorporation kit offers tools to help your organization create bylaws. These are the internal operating rules to govern your organization and help ensure that you stay compliant with IRS rules for tax-exempt status.
• Meet ongoing filing requirements: Just like with other types of LLCs or corporations, a nonprofit organization has certain annual filing requirements to stay in compliance with state and federal law. Bizee can help your organization stay in good standing with your state authorities.

Can You be a Nonprofit Without 501(c)(3)?

In simple terms, without the official IRS 501(c)(3) tax-exempt status, the company will remain non tax-exempt. Usually, micro nonprofits with annual gross receipts under $5,000 including churches and associations of churches and conventions operate without the 501(c)(3) status and donations to these entities can still be tax-deductible. 

Running a nonprofit organization is challenging, but an ideal way to make a positive difference in the world. Take assistance of your local attorney who can given you ample information on taxes and help you stay compliant to the local tax laws in your state.