Are you forming a nonprofit organization in 2019? Did you know that not all nonprofits are tax-exempt, and not all tax-exempt organizations are charities? If you didn’t know, this should help you with the forming of your organization as well as assist you with learning the differences among the various types of nonprofit organizations, including those with a 501(c) designation, which provide different benefits and responsibilities, depending on their nonprofits IRS classification.
The first step to forming your nonprofit organization is to register with the Georgia Secretary of State as a nonprofit corporation. You will be required to create a Board of Directors and submit specific documentation to include articles of incorporation. Your organization articles of incorporation should consist of necessary information about the organization, such as its purpose, officers and address. The process is relatively simple and can often be filed online and usually requires a fee of less than $100. Once your organization receives its nonprofit corporation status, it will receive certain benefits from the state, such as not having to pay sales tax or the opportunity to apply for certain types of grants.
Now that your organization has become a nonprofit corporation, you can apply for tax-exempt status at the federal level. You will need to request a Federal Tax ID Number for your organization, as well as file paperwork requesting the Internal Revenue Service to recognize your organization as a 501(c), or tax-exempt organization. When ready to submit, be sure that your application is complete and accompanied by the appropriate user fee.
Why a 501(c)? A 501(c) identifies a nonprofit organization in the Federal Law of the United States according to 26 USC 501 and is one of the 29 types of nonprofit organizations (501c) exempt from some state and federal income taxes.
There are various 501(c) classifications an organization can receive, depending on its purpose and activities. For example, the Liberty County Minority Chamber is a 501(c)3 designation because we are an educational organization that provides a lot of free information. The Liberty County Minority Chamber is uniquely structured after the highest grossing minority chamber in the nation, the Beaufort, South Carolina Black Chamber of Commerce. However, a 501 (c)3 can also pertain to religious, charitable, scientific, literary, testing for public safety, to foster national or international amateur sports competition, or prevention of cruelty to children or animal organizations. Another example, our Destination Marketing Organization (DMO) is filed as a 501(c)6, like most Chambers of Commerce, Real Estate boards, business leagues or even a pro football team. This type of organization is not organized for profit, and none of its net earnings goes to the benefit of any exclusive stakeholder or individual.
Keep in mind, while a 501(c) organization does receive tax-exemption status, meaning they do not pay taxes on certain “types” of income, not all organizations will receive a charitable status that allows donors to receive a tax write off.
I hope this helps and best of luck forming your new entity.
To learn more on nonprofits, visit the website of the Georgia Secretary of State, contact the IRS, or visit websites such as Guidestar.org or swing by the Liberty County Minority Chamber.