Starting a Non-profit
Forming a board, choosing a name and Filing 501(c)(3) applications…Starting a non-profit in Charlotte, Mecklenburg, NC and sounding counties of Gaston, Rowan, Iredell, Pitt, and all over the rest of North Carolina can be confusing and overwhelming. However, with the right information and proper legal advice, you should be able to get started with running your organization in no time. Being a black owned law firm, we understand the impact 501(c)(3) organizations can have on the local community.
We are not saying forming a 501(c)(3) going to be a hitch-free process for businesses in North Carolina. Similar to forming a for profit business, starting a non-profit requires planning, commitment, strategy, and skills. You will also need some determination and hard work to sustain the non-profit for years to come.
However, one of the most important aspects to setting up a non-profit is Filing for 501(c)(3) status. We say this is important because, if done successfully, it comes with some mouth-watering benefits for non-profits. Some of these benefits include:
Improved Credibility: By filing for official non-profit status, you command credibility, and this will convince potential donors to give to your organization.
Tax Exemption Benefits: As an official non-profit recognized by law, you can apply for either federal or state tax-exempt status.
Tax-deductible Donations: Once you file for non-profit status, donations can be tax-deductible.
Exemption from certain property taxes
Reduced Postage Rate
If you have read to this point, we believe you are ready to get started with establishing your non-profit.
Minority owned law firm Seward Tran LLP is glad to help you with getting started and here is a step by step guide to help you establish your 501(c)(3) organization with primary focus on your 501(c)(3) applications.
Let’s get to it.
Identify your Purpose
This is the backbone of any non-profit. Your purpose is what pushes staff members to do their job and donors to give. Based on the purpose chosen, you should be able to know what type of non-profit you are running, whether Religious, Educational, Literary, Scientific, etc. The ability to carefully identify and communicate your non-profit’s purpose will make it easier to get things together.
Setup your Board
In the North Caroline Area, a non-profit must have at least one director and some officers. Your board members will help split the work-load while developing the strategy and mission to move the organization forward. They are also involved in the creation of your bylaws.
It is worthy to note that the minimum age allowed for directors is 18, except for cases where the organization is involved in some youth activities where the director can be 16.
Give it a Name
This is an obvious step, and we know that. However, we will like to advise you on how to go about this. When coming up with a name for your organization, you should choose a name that uniquely identifies you in relation to the main purpose of your non-profit.
Create your Bylaws
The bylaws of your organization should clearly state operating rules and inner workings of your management procedures. The laws may include things like electing directors, holding meetings, appointing officers and more.
You can lookup bylaw templates online. But you should be aware that these templates don’t often have the needed language to qualify you for 501(c)(3) status. To achieve this, you must include statements like:
The organization will not engage in political or legislative activities prohibited under section 501(c)(3).
The corporation’s activities will be limited to the purposes set out in section 501(c)(3) of the IRC.
File your Incorporation Paperwork
Since you have your name, board and bylaws ready, filing your incorporation paperwork won't be a problem. Here, you must state your business name, location, board members and their details.
We advise that you incorporate in the state or area your non-profit services or programs will be held.
Note: Incorporating your organization doesn’t make it 501(c)(3) registered. At this point, you should also register for a federal Employer Identification Number (EIN) before the next step, even if you are yet to be an employer of labor.
File for 501(c)(3) Status
To get started with your application for 501(c)(3) exempt status, you must visit the IRS office to file the IRS Form 1023. We advise that you do this within 27 months you file your nonprofit article of incorporation. This will help you get the most from your tax-exempt status.
It should take around 3-12 months for the IRS to respond with their decision. This duration is dependent on the number of questions the IRS has about your organization. So, it's important to start as soon as possible.
The 501(c)(3) application is where the previous steps become important. This is because the IRS will scrutinize and examine your nonprofit's goal, framework, working structure, and programs. This examination helps the IRS know if there is any conflict of interest or benefits for insiders. If found guilty, it's a possible ground for denial.
The form 1023 is 28 pages long and will require some detailed information which includes:
Basic information like the name of the organization, location, contacts, board member details, etc.
A copy of your articles of incorporation and your bylaws.
Clauses that states that your organization was formed for a recognized 501(c)(3) tax-exempt purpose.
A detailed explanation of your nonprofit’s activities, including past, present and scheduled activities.
Clearly stated terms of proposed compensation for each member of the board, including directors, officials, trustees, top-paid employees, top-paid contractors.
A statement of expenses and the balance sheet.
Ensure Ongoing Compliance
Once you have successfully filed for a 501(c)(3) tax-exempt status, you should prepare your nonprofit for annual reporting. You will have to file form 990 with the IRS stating clearly your nonprofit’s activities, finances, work processes directors and primary staffs while ensuring your office is open for inspection.
However, some states have their own renewal and reporting requirements. So, we advise that you keep track of your organization’s activities all through the year.
Setting up your nonprofit in Charlotte, Mecklenburg, NC and surrounding counties in North Carolina can be a bit complicated when you consider the number of activities to be done. But with the steps stated above, we are sure your registration and 501(c)(3) filing process should be a smooth one.
However, we recommend that you get the service of a lawyer to give you legal advice when needed, making it a stress-free process for you.
Contact us at 704-500-2045 to get started.