What is a 501(c)3?

What is a 501(c)3?

Commonly known by its IRS code designation, 501(c)3 is a tax exempt status bestowed by the IRS upon your nonprofit organization. It’s regulated and administered by the US Department of Treasury through the IRS. It’s primary benefit is that donations are tax deductible to your donors.

Benefits aside, there’s a reason so many nonprofits find this the hardest part of the journey to starting and operating their nonprofit organization over the long haul.

The daunting process of filing your IRS Form 1023 Application for 501(c)3 Tax Exempt Status is the subject of many thick books, and commands fees of up to $5,000 or more through attorneys.

The process can vary in difficulty based upon factors including your projected budget and a number of other variables. The main thing the IRS is on the lookout for is any “red flags”, often an innocuous or poorly articulated policy or activity that could indicate the possibility of your nonprofit organization being used improperly in a way that would “inure benefit to any individual or corporation”.

Additionally, there are numerous hidden requirements that must be acknowledged on your 501(c)3 application that can make the journey feel like a never ending maze with few straight answers and an insanely long approval process. Frustrating.

That said, don’t let the process intimidate you. You’ve got options. We’re experts in overcoming these obstacles and we’ll help you navigate the 501(c)3 application landmines.

If you want a zero brain damage, one stop shop to get your 501(c)3 status quickly at a fraction of the cost of typical professional service firms, then check out how our nonprofit formation process works. That will show you how we can help you form your nonprofit and gain your 501(c)3 status quickly.  

If you’d like to chat further about the details, then schedule a free consult call with one of our concierges here.

Benefits of a 501(c)3

One of the most distinct benefits unique to 501(c)3 organizations is the tax deductibility of donations. Your donors receive a federal income tax deduction for the charitable contributions they make to your nonprofit organization.

This allows you to attract more amazing people to your mission and get the financial support needed to truly make an impact.

Additional benefits vary by state, and most states allow for deductibility for state income tax purposes. Also, many states allow 501(c)3 nonprofits to be exempt from sales tax on purchases, as well as exemption from property taxes.

And last, but not least, special nonprofit, bulk rate postage discounts are available from the Post Office for qualified organization

4 Main Types of 501(c)3 Nonprofit Organizations

You’re in great company. According to BoardSource, the United States is home to more than 1.6 million nonprofit organizations.

That’s a lot of people out improving their corners of the world.

Nonprofits provide a variety of services to the public, including feeding the homeless, tutoring children and providing scholarships.

The 4 most common types of nonprofit organizations are public charities, foundations, social advocacy groups and trade organizations.

Let’s take a look at each one….

  1. Public Charities: These 501(c)3 organizations provide free and low-cost services, such as education for children and career workshops for the unemployed. They receive funding from the public through the government, individuals, corporations and foundations. Churches, libraries, museums, hospitals and private schools can qualify as public charity nonprofits. Donors Choose is a great example.
  2. Foundations: Foundations sponsor numerous programs and events in the community and they often fund other nonprofits. Foundations are filed under 501(c)3 can be established through a family, a community group or through a business. Private foundations distribute funding to public charities, corporate foundations give grants to other nonprofits and community foundations fund nonprofits in a specific region or city. An example is the Anthony Robbins Foundation.
  3. Social Advocacy Organizations: These are mostly 501(c)4 membership organizations that advance a specific set of beliefs or to reach specific goals. Social advocacy nonprofits use donations and membership dues to disseminate information and advocate social change according to their mission statements. Greenpeace is a good example.
  4. Professional and Trade Organizations: Professional and trade organizations, often using the 501(c)6 designation, provide programs and services for a group of people in the same profession. Although members pay dues to join these nonprofits, they also receive free and discounted classes and career training in their chosen fields. The National Writers Union is an example.

Save Time, Money and Enjoy 100% Approval on Your 501(c)3 Application

If shouldn’t be hard to do good. And, you shouldn’t have to waste your time and money trying to figure all of this out. Our mission is to help nonprofit heroes with our online platform by eliminating the barriers to 501(c)3 formation and state and federal compliance so they can get on with saving the world.

We’re happy to help wherever you are on the journey. You’re welcome to schedule a free consult call here to get your questions answered. (Take advantage. Our concierges are awesome people and experts in the industry. They’ve got you covered.)

To your mission,

Jacqui Long | COO at InstantNonprofit

I hope you enjoyed reading this blog post.

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