There are two key steps to establishing a non-profit corporation.
Step 1:
The owner(s) or organization must first create a non-stock company. This type of corporation has no shareholders; instead, it consists of members who typically do not seek profit. These members may hold different statuses, such as those with or without voting rights. The specific rights and membership criteria are outlined in the organization’s by-laws.
In some non-stock companies, members gain entry by paying an annual subscription fee, while in others, membership is limited to a pre-determined group. The organization’s by-laws determine who can become a member.
Step 2:
Within 15 months of incorporation, documents must be submitted to the Internal Revenue Service (IRS) to obtain non-profit status. This requires filling out Form 1023. The organization’s Certificate of Incorporation must clearly state its purpose to be eligible for non-profit status.
If your goal is to create a non-profit organization that promotes education, sports, religion, charity, science, or literature, you’ll need to establish a non-stock corporation and apply for 501(c)(3) approval from the IRS. It’s important to note that personal profit is not allowed in non-profit organizations.
Once approved as a 501(c)(3) by the IRS, your organization will be exempt from Federal Income Tax, provided it operates for charitable or educational purposes and has a non-stock structure. Non-profit organizations can also be formed for political campaigns or trade unions, but it’s crucial to clearly define the organization’s purpose.
If you need assistance in starting a non-profit organization, we can guide you through the process. Feel free to contact us with any questions.
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