Many charities start out as a neighborhood effort or a grass roots movement to provide support to people, animals or the environment. But when any worthwhile activity grows, there will come a time when the organization will need leaders, paid volunteers, phones, a website, and other support. This means fundraising. But in order to legally accept tax-deductible donations as a charity, you must first incorporate as a 501(c)(3) non-profit organization.
Do Your Research
The first steps will involve setting up the basics of your organization. You will need to decide on a name. Before filing for a 501(c) or even a fictitious name statement, go to the secretary of state website for your state and search for the name. Make a note of any identical or similar names. Many charitable organizations fail, and some are involved in perpetual lawsuits—you do not want your organization to be mistaken for another or you could waste a lot of time and money extricating your organization from problems caused by mistaken identity.
You will also need a board of directors, and a registered agent with a physical address where the incorporation records will be stored. The secretary of state website, or your state department website, will have the necessary forms and full instructions on how to incorporate your charity.
Draft a detailed mission statement. The first paragraph of your mission statement should be your “boilerplate” message—a brief statement that describes your purpose and your desired goals. You will be able to recycle this statement in all your marketing and fundraising activities. The rest of your mission statement should read like a business plan. Outline the specific steps you will take to achieve your goals—funding, grants, staffing, marketing, transportation and so on. This work will pay off when you begin to apply for grants, but it is also an important first step toward knowing what you will need in your charitable corporation bylaws.
Apply for Status as a Corporation
Before you can apply for 501(c) status as a tax-exempt charity, you must first complete all the filings and paperwork necessary to exist as a corporation. Forms and instructions for incorporation are available online, but you should also enlist professionals to help you draft your articles of incorporation.
Any organization that awards grants will require a copy of your articles of incorporation and federal tax number before they’ll accept your application.
Apply for 501(c) Status
Apply to the IRS for 501(c) tax-exempt status within 27 months of incorporating. The application is lengthy (about 30 pages). For this step, you will want to seek the advice and review of an attorney, particularly if you incorporated with online forms and without legal help.
Your mission statement will be important for this step as the application is very detailed and will inquire about your structure, your finances, and your religious and political creeds.
Be sure to keep all organization minutes up to date and the corporation records in good order, as charities are frequently challenged for one reason or another.