Frequently Asked Questions
- How do I start a nonprofit?
Before someone starts a nonprofit, they need to determine if they should start a nonprofit. Check out this blog post for more.
- How many nonprofits are there in the United States?
As of 2016, there were approximately 1.54 million nonprofits registered with the Internal Revenue Service in the United States. (NCCS)
- Is there a list of all United States nonprofits
Yes. See the Directory of Charities and Nonprofit Organizations
- What is the difference between a nonprofit and an NGO?
“NGO” stands for non-governmental organization. It often refers to a charitable nonprofit that operates outside the United States. An NGO can be any kind of organization, as long as it is independent of government influence and is not organized for personal profit. In contrast, the term “nonprofit” is used to refer to organizations that are structured as nonprofit corporations operating in the United States. (National Council of Nonprofits)
- What is the difference between a private foundation and a public charity?
A private foundation is funded through an individual, married couple, family, or corporation; the aspect of its privity is based on the nature of financial support. Whereas a public charity is funded through broad public support including grants, community fundraisers, and general donations. (The Law of Tax-Exempt Organizations, Hopkins)
- What are the types of nonprofits?
There are four main types of nonprofits: charitable, educational, religious, and scientific. A nonprofit can be a combination of the types.
- What is a registered agent?
A registered agent is a person responsible for receiving legal and tax documents for a nonprofit. The registered agent must have a physical address (no P.O. boxes) in the state of incorporation.
- What is an EIN and why do I need one?
An Employer Identification Number (EIN) is a Federal nine-digit tax number that IRS assigns to nonprofits. It is required to open a bank account for a nonprofit and must be obtained prior to filing Form 1023.
- What are Articles of Incorporation and how do I file them?
Articles of Incorporation establish a nonprofit as a new business entity. It is a document that is filed with the secretary of state's office in the state in which the incorporator will operate their nonprofit. Learn more about the Articles of Incorporation here.
- What is a Corporate Purpose Statement?
A Corporate Purpose Statement is a nonprofit's unique mission that outlines who or what the nonprofit will help as well as how they will help them. It also distinguishes one organization from others.
- What belongs in the Bylaws?
The Bylaws is a document that should contain an outline of orders and operations that govern a nonprofit. It should explain the duties of board members and organizational expectations.
- Do tax-exempt and nonprofit mean the same thing?
No. Tax-exempt relates to an organization at the federal level. Nonprofit relates to an organization at the state level. More on the differences here.
- What is a 501(c)(3) public charity?
A 501(c)(3) public charity is a nonprofit organization that has been approved by the Internal Revenue Service as a tax-exempt, charitable organization.
- What is a Form 1023?
Form 1023 is the application submitted to the IRS to obtain federal tax-exempt status. Learn more about Form 1023 here.
- What is the difference between Form 1023 and Form 1023-EZ?
Form 1023-EZ is a shorter version of Form 1023 designed for nonprofits that have a gross income of less than $50,000 and total assets below $250,000. Our firm can help you in preparing for filing both forms. Book a free 15-minute consultation here.
- Is there a fee to file Form 1023?
Yes, the fee is $600. For Form 1023-EZ the fee is $275.
- Does Form 1023 need to be notarized?
No, it does not need to be notarized. However, if you have a document that does need to be notarized, a member of our staff can do it for you. Let us know about the types of documents you need to get notarized in a message here.
- Do all nonprofits have to apply for tax-exempt status?
Churches, organizations with gross receipts of less than $5,000, and affiliates of existing nonprofits covered by group exemption do not have to apply for tax-exempt status.
- What is an IRS Determination Letter?
An IRS Determination Letter is the official document that recognizes a 501(c)(3) tax-exempt status for a nonprofit. In it, the IRS indicates under which section of the Internal Revenue Code an organization is qualified.
- Can I raise funds before I get my IRS Determination Letter?
If you anticipate that your organization will receive tax-exempt status from the IRS, you can start raising funds before you receive your Determination Letter. Once approved, your tax-exempt status becomes retroactive to the state of incorporation.
- What is required for a charitable gift acknowledgment?
A charitable gift of $250 or more requires a written acknowledgment that contains the name of the organization and amount of cash contributed or a description of non-cash contributions. There may be unique other requirements for certain types of donations. For more details click here.
- How much should a nonprofit pay its CEO?
A CEO of a nonprofit should receive no more than a fair market wage as compensation for their work.
- Can board members get paid?
Yes, as long as your state does not have a law against compensation for board members. However, it is more common that board members serve on a volunteer basis.
- Does my nonprofit need a budget?
Yes, a clear financial plan is important for a nonprofit. Additionally, when applying for tax-exempt status with the IRS, financial information is requested.
- What is Form 990?
Form 990 is an annual summary submission to the Internal Revenue Service from a nonprofit. It provides a summary of the finances and activities of a nonprofit in a given year.
- What is an annual report and how do I file it?
An annual report is similar to Form 990 but is submitted to the state in which a nonprofit is incorporated.
- How do I apply for sales tax-exemption for my nonprofit?
- How long does the process take to apply for 501(c)(3) status?
The IRS requires at least 6 months to process a Form 1023 application. Currently, due to COVID-19, the process is taking 1-3 months longer.