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Guides to starting and running a nonprofit

From the first conversation about forming a nonprofit to the annual filings that keep it exempt. Every guide lists the IRS and state sources it relies on.

Starting a nonprofit

Is a nonprofit the right vehicle, and how to form one: articles, bylaws, the first meeting and the EIN.

Getting startedHow to start a nonprofit, step by stepThe ten steps from idea to 501(c)(3), in order, with what each one involves, what it costs at the IRS, and which deadline to watch.Before you startShould you start a nonprofit? An honest look at the optionsA new 501(c)(3) is one way to do good work, not the only one. Compare it with fiscal sponsorship, an existing charity, a donor-advised fund and a for-profit model.ArticlesArticles of incorporation for a 501(c)(3) nonprofitWhat your articles must say to pass the IRS organizational test, the sample purpose and dissolution clauses the IRS publishes, and the drafting mistakes that lead to IRS questions.BylawsNonprofit bylaws, explained provision by provisionWhat nonprofit bylaws cover, the choices you make on members, board size, officers, quorum and conflicts, and how the IRS sees your bylaws when you apply.Organizational meetingThe first board meeting of a new nonprofitA practical agenda for the organizational meeting, with the resolutions to adopt bylaws, elect officers, approve a conflict of interest policy, choose a fiscal year and authorize your filings.EINHow to get an EIN for a nonprofitWhen to apply for your nonprofit's employer identification number, how the online and Form SS-4 applications work, who the responsible party is, and the errors that cause trouble later.Fiscal sponsorshipFiscal sponsorship, explained for new projectsHow a project can raise deductible donations through an existing 501(c)(3), the two common sponsorship models, what the sponsor controls, and when to form your own nonprofit.

Applying for 501(c)(3) status

Who qualifies, which application to file, what it costs and what happens after you submit it.

Eligibility501(c)(3) requirements: who qualifies and whyThe IRS looks at two things, your founding documents and your actual activities. Here is each requirement in plain English, with examples that pass and fail.CompareForm 1023 vs. 1023-EZ: which application to fileA side-by-side comparison of the two 501(c)(3) applications on fees, eligibility, content and timing, followed by a step-by-step way to decide which one fits you.Form 1023Form 1023, explained part by partWhat the full 501(c)(3) application asks in each of its ten parts, which documents to upload, what it costs, and why the IRS most often writes back with questions.Form 1023-EZForm 1023-EZ: eligibility, attestations, pros and consThe streamlined 501(c)(3) application costs less and is often decided within weeks, but only if you can answer no to all 34 eligibility questions.Timing and fees501(c)(3) processing time and user feeWhat the IRS charges to apply, how to read its monthly processing-time page, what tends to slow an application down, and when an expedited review is possible.DeadlinesThe 27-month rule for 501(c)(3) exemptionFile your exemption application within 27 months after the end of the month you formed, and approval usually reaches back to day one. Miss it, and there is a gap.Charity statusPublic charity vs. private foundation, explainedEvery 501(c)(3) is either a public charity or a private foundation. Here is how the IRS decides, how the public support tests work, and what foundation status costs.After you fileWhen the IRS has questions about your applicationWhat happens after you file Form 1023, 1023-EZ or 1024: screening, requests for more information, response deadlines, proposed denials, appeals and the court option.ChurchesChurches and 501(c)(3) status, explainedChurches are tax-exempt without applying to the IRS, and they do not file Form 990. Here is what qualifies as a church, why many apply anyway, and which rules still apply.Other exemptions501(c)(4), (c)(5), (c)(6) and (c)(7) organizations, explainedNot every nonprofit is a charity. Here is how social welfare groups, unions, trade associations and social clubs get exempt status, which IRS forms they use, and what donors can deduct.

Keeping your exemption

The rules every 501(c)(3) lives by: private benefit, politics, lobbying, receipts, business income and annual returns.

Annual filingsAnnual filing requirements for tax-exempt nonprofitsWhich IRS return your nonprofit files each year, when it is due, how to extend it, when your first return is owed, and why three missed years cost you your exemption.Donation receiptsDonation receipts and acknowledgments, explainedWhat your nonprofit must put in writing for gifts of $250 or more, when a quid pro quo disclosure is required for payments over $75, and how noncash and vehicle gifts differ.Private benefitPrivate benefit, inurement and excess benefit transactionsHow the IRS separates fair pay and fair deals from insider enrichment, who counts as a disqualified person, and what the Section 4958 excise taxes cost when a deal goes wrong.Political activityPolitical campaign activity rules for 501(c)(3) organizationsA 501(c)(3) may never support or oppose a candidate, but it can register voters, host fair forums and speak on issues. Here is where IRS guidance draws the line.LobbyingLobbying limits for 501(c)(3)s and the 501(h) electionCharities may lobby, within limits. Compare the vague "no substantial part" test with the 501(h) expenditure test, see the sliding-scale dollar limits, and learn how to elect on Form 5768.UBITUnrelated business income (UBIT) for nonprofits, explainedA nonprofit can earn business income, but some of it is taxable. Learn the three-part test, the common exclusions, the $1,000 Form 990-T threshold and the separate-activity rule.Public disclosurePublic disclosure requirements for tax-exempt nonprofitsAnyone may ask to see your exemption application and recent annual returns. Here is what you must share, what you may withhold, how fast you must respond and what refusing costs.

Boards, policies and records

How a nonprofit is run well: board duties, conflicts of interest, records and pay.

Board dutiesNonprofit board duties, explainedWhat state law expects of directors, how the IRS asks about governance on Form 990, and how to split the work between the board, the officers and the staff.Conflicts of interestConflict of interest policy for nonprofitsWhy the IRS asks about conflicts on Form 1023 and Form 990, what the IRS sample policy says, and how to handle a real conflict and record it in the minutes.CompensationPaying founders and staff at a nonprofitA nonprofit can pay its founder and staff, as long as pay is reasonable and set the right way. Here is how reasonable compensation, the rebuttable presumption and Form 990 reporting work.RecordkeepingNonprofit recordkeeping, what to keep and for how longWhich records a nonprofit must keep, how long the IRS expects you to keep them, which ones are permanent, and a simple filing system a volunteer treasurer can run.

State requirements

Charity registration, state tax exemptions and keeping the corporation in good standing.

Charity registrationState charitable solicitation registrationMost states require a charity to register before it asks residents for money. Here is how registration works, common exemptions, online fundraising, and three state examples.State taxesState tax exemption for nonprofitsAn IRS determination letter does not automatically exempt you from state taxes. Here is how state income, franchise, sales and property tax exemptions work, with three state examples.Good standingState annual reports and registered agentsHow to keep your nonprofit corporation in good standing with the secretary of state, from annual or biennial reports and registered agents to reinstatement and qualifying in another state.

Changes, problems and closing

Revoked status, reporting changes to the IRS and dissolving a nonprofit properly.

ReinstatementAutomatic revocation and reinstatement, explainedMiss three years of Form 990 filings and your exemption ends automatically. Here is how to confirm it, what it costs you, and the four ways to get reinstated under Rev. Proc. 2014-11.After approvalReporting changes to the IRS after 501(c)(3) approvalChanged your name, address, bylaws, programs or fiscal year? Most changes are reported on your next Form 990, a few need a separate form, and some require a new application.DissolutionHow to dissolve a nonprofit, step by stepClosing a nonprofit means a board vote, paying debts, giving remaining assets to another charity, state filings and a final Form 990 with Schedule N. Here is the order that works.

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27-month deadline

The last day to apply and keep exemption back to your formation date.