It is important for organizations to make a profit, in order to fulfill its mission. Even if a nonprofit organization makes a profit, it has no owners and all funds go back into maintaining the organization. Organizations may file for a nonprofit status through the Internal Revenue Service (IRS) to receive tax-exempt benefits.
Organizations have the opportunity to incorporate as a nonprofit in any state. The rules to incorporate vary from state to state, but each state requires Articles of Incorporation. Within the articles the organization must state its registered agent and office to receive legal notifications. The address must be a physical address in your state and not a PO Box. If you do not wish to list a home address, there are registered agent services available to receive legal notifications. Contact your state office to learn more about the requirements to incorporate.
The Articles of Incorporation also includes the federal tax-exempt status the organization will file to become tax-exempt under the Internal Revenue Code. A list of these codes are located at:
Even though this list includes several codes to file a 501 (c) tax-exempt status, the most common filings include 501 (c)(3) and 501 (c)(6). Organizations filing as 501 (c)(3) are identified mainly as charitable, but include religious, educational, scientific, literary, testing for public safety, to foster national or international amateur sports competition, or prevention of cruelty to children or animals organizations. The main purpose of these organizations is to benefit the public. Organizations may apply for a 501 (c)(3) status if they are either a public charity or a private foundation providing charitable goals. A key component of an organization maintaining a 501 (c) (3) status is offering donors a tax deduction.
Limitation to a 501 (c)(3) is political activity. A 501 (c)(3) is not allowed to participate in any political activity. However, an organization that is not a private foundation or religious may apply for a 501 (h) election when filing a 501 (c)(3) application and participate in limited lobbying.
Even though 501 (c)(3) organizations may have members, another option is 501 (c) (6). This status allows organizations to be politically active to promote the mission of its members’. Donations are not tax deductible, but the 501 (c)(6) organization does not rely on donations to run the nonprofit. These organizations include business leagues, chambers of commerce and real estate boards, among others.
Organizations should contact an attorney specializing in nonprofit law with any questions and preparing the filing for nonprofit status.