So you want to form an organization and change world, eh? Well, you have two choices. You can do it yourself, or pay someone to do it for you. If you decide to pay someone, then you can choose between hiring an attorney or a company that specializes in creating and working with non-profits. If you choose to go it alone, then you'll need to know what forms to complete for both your state and for the IRS.

How do you know which one to choose? Start by being honest. If you can't sit down and complete your own tax return by hand, then you probably don't want to attempt to complete all the IRS forms needed to apply for not for profit status.

So then you have to choose between going with an attorney or a non-profit consultant type company. From what I've seen, most attorneys charge by the hour, whereas a consultant will usually offer a set price. As a result the consultant is usually (much) cheaper. Add to that my natural aversion for lawyers in general, and you'll find that I recommend avoiding attorneys whenever possible. That's just my personal opinion.

On the other hand, if IRS forms don't intimidate you, then keep reading and you'll see what forms you'll need to get started and you might just be able to do this yourself.

Okay, if you're still reading that tells me you're not afraid of IRS forms. That's great. Our next step is to determine what type of not for profit organization you want to form. The most common type is the 501(c)3. What this means is that it falls under section 501 subsection c subsection 3 of the US Code.

In order to be a 501(c)3, your organization must fit into the following description:

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

If your organization's mission does not fit within those guidelines then you'll want to go read the US Code Title 26 Section 501 to find out where you fit.

The rest of this article will focus on organizations that do fall under the 501(c)3 classification.

Okay, so now I'll assume that you've decided to form your own 501(c)3 non-profit organization. So now we need to outline the steps needed to obtain that coveted IRS award letter touting your 501(c)3 status.

1. Name It



What's your organization going to be called? Please spend some time on this point and make sure the name you choose isn't similar to other companies and that it doesn't limit your future growth.



2. Write the Bylaws



Your bylaws spell out the basic rules for your organization. Things such as the purpose of the organization, number of board members permitted, executive board positions and terms, frequency of meetings, and much more are covered in the bylaws.



3. Write a Business Plan



Common thinking has it that business plans are only for companies seeking loans and investors, nothing could be further from the truth. Writing a business plan forces you to think through things that you wouldn't otherwise consider. This helps you to be better prepared. Pay particular attention to the financial forecasts as you will need this information later.


4. From a Corporation



You'll need to contact your Secretary of State or similar office to find out the particulars, but you have to create your organization before you can apply for not for profit status.



5. EIN



Once you have the corporation formed, you'll need to request your EIN number from the IRS by completing a SS-4 form. This can be done online.



6. IRS Form 1023



This is it. The big one. This form will ask you many questions about your plans for your organization. Have all the information on your organization handy when working on this form. Do not expect to complete this form in one sitting.




When you first open the .pdf of this form you'll see that it's 28 pages. Don't worry, only the first 12 are required. The rest are various schedules that may or may not be required.




As you work through the 1023, there is a chance that you will be directed to complete other forms and to submit other items. As you come across these, write them down! Once you finish the 1024, then work your way through the list of additional forms that you were instructed to complete.




7. Hurry Up and Wait



Once you finish the 1023 and follow the checklist when submitting it you now get to wait on the IRS. Expect at least three weeks, but it could take two months, before hearing back from them. Please be aware that the IRS may mail you a letter asking for more information. Often times something that may seem clear to you, isn't clear to someone outside your organization. Don't worry, though. Just provide them with whatever other information they're requesting and you should eventually receive that magical letter in the mail telling you that you've made it.

When forming a not for profit organization you will incur some filing fees. The first fee will be to your state to form the organization. This will usually cost between $50 and $150 depending on the state. The next fee will be to the IRS. This user fee is either $300 or $750, depending on how you answered question 1 in Part XI of Form 1023.

Please realize that the IRS user fee is non-refundable.