Overview of the IRS 501 (c)(3) Process

If your Community Fire Safety Coalition decides funds are necessary to meet the mission of the group, establishing a nonprofit corporation may be your next step. The process can be expensive and time consuming, but if you have structured your membership with professionals such as lawyers and CPA’s, you may have the expertise to make this a simple process.

The IRS 501 (c)(3) application process is a critical step in organizing your nonprofit organization. The IRS application is needed to gain tax-exempt status for your organization, including the ability for contributors to your organization to make tax deductible donations.

To be tax-exempt as an organization described in Internal Revenue Code (IRC) Section 501(c)(3), an organization must be organized and operated exclusively for one or more of the purposes set forth in IRC Section 501(c)(3), and none of the earnings of the organization may inure to any private shareholder or individual. In addition, it may not attempt to influence legislation as a substantial part of its activities and it may not participate at all in campaign activity for or against political candidates.

The organizations described in IRC Section 501 (c)(3) are commonly referred to under the general heading of “charitable organizations.” Organizations described in IRC Section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with IRC Section 170.

Statement of Mission/Purpose

In order to learn how to start a nonprofit organization, you need to establish what your organization stands for. As a first step, it is essential to prepare a statement of mission/purpose that clearly outlines the purpose of the organization, the philosophy behind its formation and the reason for its existence.

The mission statement will set your organization apart from others. It should be 1-3 powerful sentences that clearly define your purpose and the cause that you support.

Incorporate & File as a Nonprofit Corporation

Filing your articles of incorporation as a nonprofit is a priority, and it is needed to move on to the next step. Incorporating ensures you, your board and your officers will not be personally responsible for any debts and liabilities incurred. Seek the advice of a professional attorney, or use a more affordable service to complete this step.

Form your Nonprofit Board of Directors

Give a lot of thought into who should sit on your board. A few tips here: locate well known, compassionate people. They should be able to dedicate time and energy to your cause. Look around to see who is sponsoring and donating to causes like yours. Is it a company? Research their CEO, and write a professional letter acknowledging them as an expert; then invite them to join your board. Be prepared to have at least 3 directors, although some states may require more.

Draft Your Bylaws

Bylaws determine the who, what and where of your organization. Although they are not required to file for 501(c)(3), they are very likely to be asked for during financing and are the guiding documents of your organization.

Apply for an EIN

The EIN is the Employer Identification Number. It is a free security number for your organization. Whether you have employees in your 501(c)(3) organization, or you are venturing solo for now, you’ll need it.

Visit www.irs.gov to obtain an Employer Identification Number.

Budgeting & Accounting for 501(C)(3) Non Profits

Proper budgeting and accounting are necessities for nonprofits from the start. They are accountable to the government, founders, banks and the general public. Keep good records of budgets, documents and financials. When choosing an accounting software, choose one specific to nonprofits.

File for 501(c)(3) Status

To do this, obtain Form 1023 (application) and Publication 557 (detailed instructions) from the local IRS office or www.irs.gov. The filing fee depends on the organization’s budget. When filling out the form, consult a CPA experienced in nonprofit filings.