Kickstart your nonprofit corporation
How to start a nonprofit with GetGoLegal—it’s easy!
- Tell us your nonprofit name
- Answer some questions online
- We’ll complete and file your paperwork
We can help you with the rest, too!
- Get an EIN (Employer Identification Number)
- File for 501(c)(3) tax-exempt status
- Obtain a list of required licenses
What is a nonprofit?
Nonprofit organizations are groups formed for a charitable purpose rather than for profit. The income generated by a nonprofit is not distributed to its members, directors, or officers.
What causes are eligible for a tax-exempt designation?
A nonprofit designation and tax-exempt status are granted only to organizations that promote specific causes. Examples include organizations focused on religious, scientific, charitable, educational, literary, sports competition, cruelty prevention, or public safety objectives.
How to start a nonprofit in 5 steps
Advantages and disadvantages of a nonprofit
Advantages of a nonprofit
- Work on solving issues, creating change, and giving back
- Obtain Internal Revenue Code 501(c)(3) tax-exempt status if eligible
- Qualify for certain government grants and loans
- Accept tax-exempt funds from another nonprofit through fiscal sponsorship
- Pay yourself a fair salary as part of operating expenses
Disadvantages of a nonprofit
- Maintain records of donations, grants, funding, operational expenses, and finances
- File an annual information return with the IRS to maintain your tax-exempt status
- Stay compliant with bylaws that dictate how the nonprofit must be governed
- Disclose salaries and finances for public inspection
What qualifies as a 501(c)(3) nonprofit?
The primary requirements are to operate solely for religious, charitable, scientific, or educational purposes (among others) and to submit annual reports to the IRS.
What is a 501(c)(3) not allowed to do?
Organizations can lose their 501(c)(3) tax exempt status by distributing earnings to shareholders, engaging in political activity or substantial lobbying, or failing to pursue their stated charitable or other qualifying purpose.
Frequently asked questions
Nonprofits generate revenue from sources such as grants, donations, and membership programs. They use this income to cover operational expenses, including employee salaries.
Nonprofits are referred to by various terms. You might come across the term “NPO” for a nonprofit organization. If the organization serves a specific group of members rather than the general public, it may be called a not-for-profit organization. A public university is an example of a nonprofit institution. Tax-exempt organizations are sometimes informally called “501(c)(3) nonprofits.”
A key distinction is that a for-profit company can distribute earnings to its owners or shareholders, whereas a nonprofit is prohibited from doing so. To preserve this difference, it’s essential to have strict oversight of the organization’s net earnings and finances.
Because nonprofit corporations have boards of directors to consult, they may be slower to respond to opportunities compared to more agile startups.
A nonprofit can be established as a corporation, but other types of nonprofit entities, like a nonprofit LLC, can also be created.
An LLC is a type of business legal entity, whereas the term 501(c)(3) refers to any organization that has been granted tax-exempt status by the IRS under that particular section of the Internal Revenue Code.
It’s a section of the Internal Revenue Code—26 U.S.C. § 501(c)(3)—that exempts eligible organizations from federal income tax and permits them to receive tax-deductible donations.
In addition to meeting various IRS requirements, qualifying organizations must typically be engaged in activities related to religion, charity, science, public safety, literature, or education.
Civic leagues, homeowners associations, social welfare organizations, and political organizations are common types of nonprofits that do not qualify for 501(c)(3) status. However, they may be eligible for tax exemption under different sections of the Internal Revenue Code.
To maintain your tax-exempt status, you must comply year-round by keeping detailed records of all finances and expenses, adhering to nonprofit bylaws, and submitting Form 990 annually to the IRS.
Both public charities and private foundations hold 501(c)(3) status, but their funding sources differ. Public charities generally receive funding from the public and government, while private foundations typically rely on donations from a small group of individuals, a family, or a corporation. Regardless of the source of funding, none of the earnings can be distributed to private shareholders or individuals.