Frequently Asked Questions
Q: What makes an organization nonprofit?
A: The term “nonprofit” does not mean that the organization cannot make a profit. A nonprofit organization is not formed for the purpose of making a profit, but for the purposes recognized under state and federal law.
What makes an organization “nonprofit” is that:
1. 1. The mission of the organization is charitable, educational, religious, etc, but not primarily to earn a profit.
2. No person owns shares of the corporation or interest in the corporation property.
3. The property and any income of the corporation are returned back to the corporation to further its mission and activities.
Q: What is the different between a nonprofit organization and a for-profit organization?
A: The difference between the two organizations
1. A nonprofit use their funds to advance their programs.
2. A for-profit business organizations distribute their profits to their owners or stockholders.
3. A nonprofit organization does not have any owners, it is owned by the public.
Q: What are the different types of nonprofit organizations?
A: Nonprofit organizations fall into five main categories:
1. Charitable organizations, which must generally demonstrate a benevolent (charitable) component. This category includes, religious groups, museums, libraries, environmental and educational organizations, and the diverse group commonly referred to as "charities."
2. Trade associations, organized to advance a group of people who have a common profession such as doctor, nurses, teachers, carpenters, unions, etc.
3. Social clubs such as antique clubs, motorcycle clubs, country clubs and fraternal organizations.
4. Political groups and organizations, generally organized to promote candidates for political office or to promote certain policies or issues.
5. Governmental groups including city, county, state and federal agencies.
Q: Should I start a nonprofit organization?
A: First, do your homework!
1.The first question to ask should be, “who will benefit from this organization?"
A. If you are looking to benefit yourself or your family then you should start a for-profit company rather than a nonprofit organization.
B. If you are looking to benefit the community or the public at large, then a nonprofit organization is probably best.
2. Before creating a nonprofit, determine your goals and find out who else in the community may be doing the same thing.
3. If another organization is offering the same or similar services ask,"Are they"
A. Providing successful services?
B. Can the organizations work together?
It is possible that organizations can make a greater impact when they collaborate on projects and programs.
4. It takes a significant amount of time, effort and resources to start and maintain a nonprofit organization.
Q: Why should we apply for 501(c)(3) tax exempt status?
A: There are three principal reasons why obtaining 501(c)(3) tax-exempt status benefits your organization.
1. Upon IRS approving your 501(c)(3) application, your tax-exempt organization receives several federal, state and local tax exemptions.
2. Obtaining IRS 501(c)(3) tax-exempt status gives credibility to your organization and may help the organization receive donations from individuals and grants. Some corporations and foundations are required by their bylaws to only make donations to 501(c)(3) tax-exempt organizations.
3. 501(C)(3) tax-exempt status allows you to obtain discounted mail, purchases, services and other preferences.
Q: What documents do I need to get started?
A: You begin by securing nonprofit status in your state by filing your Articles of Incorporation for a nonprofit organization.
1. Articles of Incorporation typically state the purpose of the organization, its name, its place of business, key officers, various limitations and the name and address of the registered agent in the state.
2. If you want the organization to be exempt from federal corporate income taxes and for the donations you receive to qualify as tax deductions for people who make them, you must apply to the IRS for federal recognition as a 501c3 tax-exempt organization.
3. Registration with a state as a nonprofit corporation is required before the process of securing IRS recognition can begin.
Q: What are bylaws and are they required?
A: Bylaws are the board’s governing rules.
1. It’s the board’s specifications of the structure and operations of the organization. All nonprofit organizations should have bylaws.
2.You must include a copy of your organization bylaws in the 501(c) (3) tax-exempt application.
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