In one of our perennially popular Free Enterprise posts we ran down a to-do list for starting a nonprofit.

Now, let’s take it one step further and talk about what you need to do if you want to have a smooth ride through the IRS nonprofit tax exemption process.

Here’s a simple checklist so be sure to click on the links throughout the post for more detailed information.

  • Research and reserve
  • a name. Be sure that the name you want is
  • available. Also check your state’s nonprofit corporation laws to make sure that
  • you can use the name in connection with a nonprofit. Nonprofit
  • tip: In California, you can’t use the name “trust” in connection with a
  • nonprofit. Choose your board
  • of directors. Your board will vote on issues affecting the
  • nonprofit. The IRS will likely want their names and qualifications, so make sure
  • you have a well selected board. Nonprofit tip: Try not to choose too many
  • related members for your board. File your formation documents. If you plan to get tax
  • exemption, file
  • for incorporation. You don’t have to do this by law, but it makes your life
  • easier before the IRS. Nonprofit tip: LLCs result in a lot more
  • questions during the IRS tax-exemption process. Create your nonprofit bylaws. These are important documents
  • because the IRS will ask you for them. Play close attention to the conflict
  • of interest clause and any compensation clauses. Get your EIN. You
  • can’t file for tax exemption without your Employer Identification Number. So
  • apply online to get your EIN. The process takes half an hour or less. File for Federal tax
  • exemption. In order to file for tax exemption,
  • your nonprofit will have to file the Form 1023 with the IRS. This is a very
  • large form, complete with supplemental narratives, so plan your time
  • accordingly. File for State
  • tax exemption. Each state has a different set of
  • criteria for tax exemption. Check with your state’s taxing authority to see what
  • you might need to file. Register with your State for Fundraising and Solicitation.
  • If you plan to solicit funds for your nonprofit, you might have to register with
  • the Attorney General or Secretary of State. There is also a Uniform Registration Statement for
  • many states. Get Insurance. This isn’t a hard and fast requirement, but
  • it might shield your board members from potential liability down the line. Look
  • into it. Get local business licenses and/pr permits. Depending on
  • the type of nonprofit you plan to run, you might be required to get some zoning
  • clearance from the local authorities. This might be the case if you plan to own
  • real estate which you plan to use for nonprofit activities.

Related Resources:

  • Life Cycle of
  • an Exempt Organization (IRS)Checklist:
  • Starting a Non-Profit Corporation (FindLaw)Churches and Religious
  • Organizations (IRS)Application for
  • Recognition of Exemption (IRS)

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