Each year, thousands of non-for profit organization are created. As part of the creation process, the founder of the non-for-profit must ensure specific government filings are made to establish a legal identity on which individuals, corporations and grantors can offer financial support. As the founder of a non-for-profit organization, understanding the steps required, will ensure a more efficient establishment of the non-for-profit and, in return, resulting in more expeditious funding.
When beginning a non-for-profit organization, the first step is to create the organization name. Choosing a non-for-profit organization name is not a process to be taken lightly. Use words or phrases which describe the mission or goal of the non-for-profit in a snapshot company name. Once created, the first step in the creation of a non-for-profit organization is to file the appropriate business names on file with the county clerk’s office. For a nominal fee, the non-for-profit organization is established in name only and an assumed name document will be given to the founder of the non-for-profit organization.
With the assumed name document, the next step in establishing the legal status of the non-for-profit organization, is to obtain an employer identification number. Contact the Internal Revenue Service, by phone or online and complete Form SS-4 which will establish the Employer Identification Number of the non-for-profit organization at no cost to the organization or the founder.
Upon receipt of the Employer Identification Number, EIN, the next step, in establishing a non-for-profit organization, is the filing of Form 1023 with the Internal Revenue Service. Form 1023 is the form which is the most crucial to the non-for-profit organization’s financial prospectus. It is with the Form 1023 that a non-for-profit organization obtains its tax exemption status so as to avoid the payment of federal income tax and, in addition, it is Form 1023 which will provide the non-for-profit with the ability to claim monetary and gift donations as gifts and not as income. While all steps of the non-for-profit organization establishment are crucial, filing Form 1023, with the Internal Revenue Service, is the lifeline of the non-for-profit organization’s financial status.
As with any new business venture, considering the various paper intensive requirements is often the key to determining the decision to begin the venture and at what time. With the creation of many non-for-profit organizations falling with good intentions, in most cases, the organizations demise lies in the failure of the founder to adequately secure the appropriate non-for-profit organization status with both local government as well as the Internal Revenue Service.
For more information regarding non-for-profit organization development, visit www.irs.gov.