Q. How long does it take to get the 501c3 status from the IRS?
A. The following information was derived directly from the IRS website: https://www.irs.gov/charities-non-profits/charitable-organizations/wheres-my-application
The Process: Upon receipt, exemption applications accompanied by the required user fee are initially separated into three groups: (1) those that can be processed immediately based on the information submitted; (2) those that need minor additional information to be resolved; and (3) those that require additional development.
If your application falls in the first or second group, you will receive either a determination letter granting 501c3 status or a request for additional information, via phone, fax, or letter within approximately 60 days of the date the application was submitted. If your application falls within the third group, you will be contacted once your application has been assigned to an EO specialist.
Current status of applications requiring additional development
I have clients who have sent in their application and received their determination letters back in as little as 3 weeks and I have other clients who received their determination letters within the 90-120 window that is normally the standard processing time. Starting a nonprofit does not have to be a painful, confusing process. Let us assist you with the preparation of the IRS 501c3 application to insure that all required information and documentation are together to minimize your processing time.
Q.What is the filing fee for the IRS 501c3 application?
A.The IRS charges a filing fee which is dependent upon the actual or projected budget of the organization. For organizations whose actual/projected 3 year budget is less than $40,000 in gross receipts for all three years, their filing fee will be $400.00. For organizations whose actual/projected 3 year budget is more than $40,000 in gross receipts in any of the three years, their filing fee will be $850.00. Please do not misunderstand the filing fee, as that is a fee that the IRS charges (which for reference you can view here) and does not come to One Stop Biz Help. This fee is accompanied by the 501c3 application that has been signed by the organization directly to the IRS.
Q. What are gross receipts?
A. Gross receipts are all monies received by the organization regardless of whether it was in the form of fundraising, donations of money, donations of materials, grants, etc. before any expenses are deducted.
Q. Will donations be 100% deductible after I receive my 501c3 status?
A. Yes, all donations will be 100% deductible for the donor after you have received your status from the IRS.
Q. Will obtaining the 501c3 status also allow me to be exempt from state taxes for my organization?
A. Not generally. There are some states that will automatically consider you exempt from state tax with the determination from the IRS, however there are states that require you to file an application for exemption from state tax and they may require that you wait until you have the determination back from the IRS before pursuing state tax exemption.
Q. Will I be able to accept donations, hold fundraisers or submit for grants while waiting for the IRS to process my application?
A. Yes and no. Yes, you will be able to accept donations and hold fundraisers, however, you need to make sure the donors are aware that you are awaiting your determination from the IRS. No, you will not be able to solicit for grants until you have received your determination. Most grants are dependent upon the 501c3 determination so it is best to wait until you have the determination back before pursuing grants.
Q. What does being a 501(c)(3) tax-exempt organization mean?
A. The term "tax-exempt," when used in reference to nonprofit organizations, generally refers to the net profits (proceed above and beyond expenses) of an organization being exempt from federal and/or state income tax. While a nonprofit organization can be established by incorporating, the entity is not automatically tax-exempt upon creation with the state. Tax-exemption can usually be achieved only through applying for and receiving 501(c)(3) approval from the Internal Revenue Service (IRS).
Q. What about Directors? How many do we need? How do we select them?
A. Directors have 100% control of the corporation. It is very important that you have trustworthy directors. The IRS requires a minimum of three. You can have as many as ten. We recommend an odd number to avoid a deadlock in voting. If you want more than ten directors, you can amend your Bylaws once you have obtained tax-exempt status. When selecting the Board of Directors or the Officers/Trustees of the organization, keep in mind that the IRS limits the operation of the board by related individuals to less than 50%. So if you have 3 board members, and 2 of the members are related by family (husband/wife, parent/child, etc.) then you will need to add 3 more board members that are not related to insure that not more than 50% of the board is related by family.
The directors vote for the officers (President, Vice President, Secretary, and Treasurer) and can normally change them at any time (absent a contract to the contrary). Here's a brief story to keep in mind when selecting the Directors: A man (we'll call him John) operated a nonprofit organization for 20 years. John, his wife Sally, and a third director Harry, comprised the board of directors. When Sally divorced John, she joined up with Harry and they removed John from his organization. After 20 years of sweat and toil in his nonprofit, John was out in the street. Choose your directors wisely.
Q. Do the Directors and officers have to live in my state? Do the directors and officers have to be U.S. Citizens?
A. No, they can live anywhere in the U.S. or reside abroad. They can be U.S. citizens or foreign nationals. Normally, the treasurer must be a U.S. Citizen or a legal U.S. resident, and the accounting records for the organization must be kept in the U.S. If the organization has no U.S. presence, it may still obtain tax-exempt status (e.g. to get grants) but donations to it would not normally be tax deductible.
Q. How to start a 501c3 - Articles of Incorporation are not called that in my state, what is the difference?
A. Different states call the basic organizational document by different names: Articles of Incorporation, Certificate of Incorporation, Articles of Organization, Articles of Agreement, Articles of Association, or Charter. For simplicity purposes we call them Articles or Articles of Incorporation. This is sometimes called the charter or constitution of the organization. There is not a definite difference among the different names, just a preference by the state as to the name of the "organizing" documentation.
Thank you Cindy for all of your hard work. I am so thankful that I found you after all the struggles I have been through with the previous company I signed up with. The first company I found would not answer my phone calls or emails and left me to prepare all of the information by myself. When I came across your site, I wondered if this was a hoax, but decided to give it a try. You reviewed all of the information and prepared the items that were left incomplete by the other company. If it wasn't for you Cindy, then I would not have my organization where it is now! You always answered the phone and were quick on email responses. I never had to stress over what was going on because you made sure that I was informed and knew the process! Thank you again Cindy and we will be back soon to start our grants and fundraising with you!
- Anabelle H.
THANK YOU, THANK YOU, THANK YOU! I cannot say it enough, thank you! Your company wrote our business plan and assisted us with obtaining over $150,000 in start-up monies for our small business! I don't know what I would have done without you Cindy! Again, thank you so much!
- K Ghazale
You have been a Godsend, Cindy. Thank you for your work on our 501c3 application and all of the other stuff to go with it. You made the process simple, stress-free, and were always there if we had questions! I look forward to working with you soon to prepare our grants and other items that we may need.
- Veronica B
I have struggled for 3 years to get my nonprofit started and operating. I found Cindy Trout through a friend who had used her services and I cannot explain the gratitude and appreciation I have for Cindy. She assisted us with the steps necessary to start our organization, prepared our incorporating documents, as well as prepared all of the other items needed to obtain our 501c3 status. We received our determination letter from the IRS in 3 weeks and I couldn't be happier! The service and support that we received from Cindy and her staff is exceptional. If we had a question, it didn't matter what time of day or night or what day of the week, she was always there to help. We are now hiring Cindy to do some grant writing for us and will be back for her assistance on our Form 990 each year. Great job Cindy! We would not be here today if it weren't for you!! Good luck to all of those who are starting nonprofits, and if you are considering using One Stop Biz Help, you are making a great decision!
- Elaine B.