Navigating 501(c)(3) incorporation: A step-by-step guide for new nonprofits

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Obtaining 501(c)(3) status provides your non-governmental organization (NGO) with several benefits. Nonprofits and NGOs with 501(c)(3) status are exempt from U.S. federal taxes and can be exempt from state and local taxes. Donations made to 501(c)(3) organizations are also tax-deductible, which encourages giving. And nonprofits with this status can apply for a wider range of grants, securing more funding.


Bear in mind that many U.S. nonprofits are based locally while many NGOs operate in other countries to better deal with worldwide issues. If this is true of your NGO, you may be subject to different incorporation requirements and international laws. It can be useful to refer to a resource like the Global Nonprofits Guide that helps nonprofits and NGOs navigate the laws of their chosen country.


That said, this nonprofit start-up guide will help you learn more about 501(c)(3) status in the United States and the steps required for incorporation.

Understanding 501(c)(3) Status


According to the Internal Revenue Service (IRS), 501(c)(3) is a designation given to charities, nonprofit organizations, and private foundations. These groups are “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes.”


501(c)(3) organizations are:


  • Exempt from federal income taxes
  • Able to receive tax-deductible contributions
  • Eligible for government and private grants
  • Able to receive discounts from retailers
  • Eligible for free advertising via public service announcements


To enjoy these benefits, 501(c)(3) organizations must comply with IRS regulations. They must make their finances available for review, they must not be formed for the benefit of any private interest, and they may not participate in any political campaign for or against a candidate. Failure to comply with these regulations can result in fines and the loss of 501(c)(3) status.

Preparing for Incorporation


Before you can apply for 501(c)(3) status, you need to turn your nonprofit into a corporation. This is done at the state level, so it's important to learn the specific regulations you need to follow for your state. Steps typically include:


  • Establishing your mission to meet 501(c)(3) purposes
  • Forming a board of directors to oversee your nonprofit and advise management
  • Appointing a registered agent to receive legal documents on your nonprofit’s behalf
  • Conducting a name search to make sure your desired nonprofit name is available

Drafting Key Documents


Next, it's time to draft your Articles of Incorporation. These legal documents establish your corporation and are filed with a state of your choice. The articles provide:


  • Your nonprofit’s name
  • Your nonprofit’s address
  • The purpose of your nonprofit
  • Registered agent name and contact information
  • Board member names and contact information
  • Incorporator name and contact information


Follow all federal and state-specific requirements for any additional information you need in your articles to apply for 501(c)(3) status. This includes tax-exempt provisions that establish your nonprofit will follow the requirements set in section 501(c)(3) of the Internal Revenue Code and not engage in prohibited political or legislative activities. You also need a provision establishing your nonprofit’s assets will be permanently distributed for an exempt purpose if your organization dissolves.


Next, create a set of bylaws that establish how your nonprofit is governed. Bylaws cover:


  • Board structure
  • Officer responsibilities Voting rights Conflict-of-interest policies
  • Amendment policies
  • Member succession and removal procedures


For help with drafting documents, use these free templates for Articles of Incorporation and nonprofit bylaws.

Filing for Incorporation


You can incorporate your organization in a state other than where your nonprofit is physically located. Your state choice affects the legal jurisdiction in which your organization operates, which can impact:


  • Corporate and franchise taxes
  • Filing and annual fees
  • Business regulations
  • Investor perception
  • Legal protection


Consider the needs of your nonprofit when selecting a state. While tax implications may not be a factor if you acquire state tax-exempt status or incorporate in a state that does not levy corporate income tax, filing fees and business regulations still need to be investigated.


Once you select your state, file your Articles of Incorporation through the secretary of state’s office. You can file the articles yourself through a legal help site (like LawHelp.org or Charitable Allies) or with a lawyer’s assistance. Most states now allow online filing.


Next, you'll need to pay the filing fee. This can range from $100 to $300, depending on the state. You may also have to pay other fees, such as registered agent fees, legal service site fees, and attorney costs. Visit the secretary of state’s website for your state to learn specific filing and fee information.


Processing time can take anywhere from a few days to several months depending on the state. Online requests are usually handled faster. Filing volumes are also usually higher at the start and end of each year and before IRS federal tax filing, which can affect processing time.

After processing, some states require you to publish a public notice of incorporation in a local newspaper. You should also apply for a federal employer identification number (EIN) to register your business with the IRS.

Applying for 501(c)(3) Status


Once your organization is incorporated, you’re ready for the actual 501(c )(3) application process. Start by filling out Form 1023. Certain smaller organizations can use the shorter Form 1023-EZ.


You'll want to assemble any supporting documents for 501(c)(3) status into one PDF file. These may include:



Forms can be submitted electronically through www.pay.gov. The user fee for Form 1023 is $600, while the fee for Form 1023-EZ is $275.


Forms are processed as soon as possible. You can check on the status of your application at: Where’s my application for tax-exempt status? While Form 1023- EZ can’t be expedited, Form 1023 can be expedited for compelling reasons, such as a pending grant. Once your application is approved, you’ll receive an approval letter in the mail.

What to Avoid When Filing for 501(c)(3) Status


To ensure filing for 501(c)(3) status goes as smoothly as possible, avoid the following mistakes:


  • Neglecting state-specific requirements for incorporation
  • Not providing all required information on officers and board of directors Forgetting signatures from directors, trustees, or principal officers
  • Forgetting to submit a copy of bylaws
  • Not attaching all required forms
  • Not creating a detailed mission statement
  • Not providing enough financial data
  • Leaving form sections incomplete
  • Not paying the required fees

Making 501(c)(3) Incorporation Easier


Are you in the early stages of nonprofit registration? If so, now is the perfect time to draft your bylaws and Articles of Incorporation so you can successfully apply for 501(c)(3) status. Take some early initiative, and your nonprofit can benefit from all of the tax exemptions and funding opportunities that come with 501(c) (3) incorporation.


Need extra support?


  • Nonprofit consultant Desiree helps nonprofits correctly complete the federal application for 501(c)(3) status, leading to faster approval.
  • Bylaws editor Matt can help you file everything from your Articles of Incorporation to the Form 1023 while providing advice on any special state requirements.


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