CharityNet USA is a nonprofit startup center helping to start non profit organizations. http://www.charitynetusa.com/nonprofit-start-up/

1. ESTABLISHING A NONPROFIT
ORGANIZATION
WITH TAX EXEMPT ELIGIBILITY
An Overview
Starting a
Nonprofit Organization

2. Nonprofit Formation Overview
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

3. Points to Consider
 What is involved in legal
formation?
 What resources are
available?
 Where will the organization
be located?
 Will it qualify for tax
exemption?
 What are the reporting
requirements?

4. Establishing a Nonprofit:
Step by Step
1. Establish a Board of Directors.
2. File Articles of Incorporation with the state.
3. Make sure the organization is registered in each
state in which funds will be solicited.
4. Become recognized as a 501(c)(3) organization.
5. Obtain exemption from state income and sales
taxes, if possible.
6. Maintain compliance with annual filings.

5. Board Establishment
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

6. Why a Board of Directors?
 There must be some protection built into the
system so the government can feel that the
public purposes of a nonprofit are being
carried out.
 It requires that a group of individuals act as
guardians of the public trust-that have the
public’s interest at heart.
 An effective board can make it possible for the
management, staff, and volunteers to focus
upon the day-to-day tasks of making that
mission a reality.

7. Board Responsibilities
 The Board is Responsible for:
Legally and financially the conduct of the
nonprofit organization
Defining the organization’s mission,
goals, and objectives
Public accountability and creation of
public value

8. Board Activities
 The Activities of a Board Include:
Creates mission statement and reviews it
periodically
Makes policies (Drafting AOI, Bylaws,
Conflict of Interest Policy, Trustee
Manual)
Selects, evaluates, and terminates the
chief executive
Appoints committees for different
purposes
Enhances nonprofit’s public reputation

9. More Board Activities
 Additional Activities Include:
Manages the organizations funds
Assists in developing annual budget
Makes personal financial contributions
Assesses its own performance
Engages in long term strategic planning

10. What Board Members Do NOT
Do
 Board Members DO NOT:
Become involved in day to day operations of
the organization
Hold owner’s equity in any organization
assets
Receive compensation or salary for their
Board duties

11. IRS Board Guidelines for
501(c)(3)
 Must have a minimum of
3 members on the Board
of Directors
 Must have a minimum of
51% that are strictly
volunteer
 Must have 51%
unrelated in family or
business

12. Board Indemnification
 Most organizations indemnify their
Board members, meaning that in
most cases they cannot be held
individually responsible for legal
action against the organization.
 However, if a trustee shows
negligence in financial matters they
can and will be held personally liable.

13. Legal Formation
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

14. Where Will the Organization
Be Located?
 The organization should be incorporated
and headquartered near your planned
area of operations.
 Keep in mind a Registered Agent must
have a physical address in the state
where the business is incorporated.

15. Choosing an Organization
Name
 Choose a name that is marketable,
unique, and describes what the
organization will do, or will aspire to relate.
 Avoid naming the organization after an
individual, in most cases.
 Develop a mission statement relating to
the organization’s name and planned
activities.

16. Incorporation
 To become a legally established nonprofit
corporation, the organization must file
Articles of Incorporation with their state.
 This is the governing document that
establishes the purpose of the
organization, and puts limits on the
activities the organization may undertake.

17. Incorporation
 Specific information required by the
IRS must be included if the
organization wishes to apply for tax
exemption.
 The format of this document will vary
by state.

18. EIN #
 During the incorporation timeline, the
organization should also request an Employer
Identification Number from the IRS (tax id#).
 This number is a unique identification number
for the business, such as the social security
number is for individuals.
 Once the organization has been granted tax
exempt status, the IRS simply updates their
records to note that this # belongs to an
exempt entity.

19. Application for
Federal Tax Exemption
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

20. Why 501(c)(3)?
 A common next step is to request
determination under IRC 501(c)(3)
 Many types of nonprofit organizations may
qualify for exemption from federal income taxes,
however that exemption is not automatic.
 Applications must be filed with the Internal
Revenue Service requesting the privilege of tax
exemption for the organization.

21. 501(c)(3) Benefits
501(c)(3) Organizations:
 Do not pay federal corporate income tax. With this
exemption, an organization can save 15-35% of its
taxable income.
 In most cases do not pay state corporate, franchise,
excise, sales, and use taxes.
 Can offer individual and corporate donors a tax
deduction for their contribution. This is an incentive for
taxpayers who itemize their deductions.
 Are eligible to receive foundation grants.
 Are eligible for lower postal rates with the U.S. Postal
Service.
 Are viewed as a whole as reputable organizations.

22. 501(c)(3) Application Package
At minimum, to apply with the IRS for recognition
as a 501(c)(3), and organization will need:
 Form 1023 Application for exemption
 Financial Plan (3-5 years)
 Articles of Incorporation
 Bylaws
 Conflict of Interest Policy

23. State-level Compliance
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

24. State Level Compliance
 A variety of state-level filings may have to
be completed on an annual basis.
 Failure to complete all state required
filings may result in the organization owing
state taxes, falling out of good standing, or
even being administratively dissolved.

25. Form 941 for Employees
 This is a quarterly filing for organizations
who have paid employees.
 Like all employers, charities who pay
wages must withhold, deposit, and pay
employment taxes-including federal
income tax, Social Security, and Medicare.

26. State Corporate Tax Returns
 Nonprofits must be sure to obtain state level
sales and income tax exemptions, if available
in their state.
 If the organization is not granted state
exemption, they must file and pay taxes!
 In some cases, organizations exempt from
state taxes must still file some sort of annual
return (varies state to state)

27. Annual Reporting
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

28. Books and Records
 Organizations must keep adequate
records of their finances, thus
professional bookkeeping is
essential:
 Document all sources of receipts and
expenditures
 Keep donor records
 Retain all supporting documents-such as grant
applications and awards, sales slips, paid bills,
deposit slips, cancelled checks
 Prepare annual financial statements

29. Form 990
Form 990 (Annual Tax return for Exempt
Organizations)
 ALL organizations now required to file,
regardless of revenue
 Penalties imposed for not filing
 Revocation of 501 status if not filed for 2 or
more years in a row
 Professional bookkeeping year round makes
filing a breeze

30. CharityNet USA
Services & Processes
I. NPO Formation Overview
II. Board Establishment
III. Legal Formation
IV. Application for Federal Tax
Exemption
V. State-level Compliance
VI. Annual Reporting
VII. CharityNet USA Services &

31. CharityNet USA Pricing
 Prices charged for completion of the
paperwork necessary to establish a nonprofit
organization will vary, depending on how far
the client is in the process and how many
supplemental documents they’ve already
prepared.
 In addition, pricing may be affected by the
number of state level filings required in the
client’s state.
 Price quotes include only document
preparation fees, and all government filing

32. CharityNet USA Services
CharityNet USA provides:
 501c3 tax exempt
services
 State tax exemption &
Charity Registrations
 Articles of Incorporation
 Grant writing Services
 Strategic Planning
Services
 Web development
Services
 Bookkeeping and
Accounting Services

33. Our Process
 Once a sale has been
made, clients are given
access to a specific “Steps
Page” related to the
service purchased
 Here, they will find a
variety of information,
FAQ, processes, and
questionnaire to help them
provide us with quality
content to complete their
work.
 Additionally, we provide
value added resources to
build goodwill and help our
clients manage or grow
their business.

34. Conclusion
 As a nonprofit consultant, your goal is to be
recognized as a trusted advisor, share ideas, and
build relationships with local nonprofits and
churches.
 CharityNet will support you with service experts in
a variety of key competencies including tax &
accounting solutions, marketing, graphic design,
writing services, web development, and more.
 The key to success will be to help your clients find
revenue through fundraising and then recommend
fundamental services to build a strong foundation
and successful future.

35. Contact us
 Call us for more information
 Tel#: 407 857 9002
 Ask about our promotions and easy pay plans
 E-mail : info@bizcentralusa.com