For most nonprofits, the 501c3 application process consists of four distinct components, each of which is necessary to obtain federal tax exempt status from the IRS.
The first component is to Incorporate
in your state by filing Articles of Incorporation. While there are other ways to form a 501c3 organization, such as setting up a trust or “non-incorporated” organization, incorporating is by far the most common method. Incorporation costs vary from state to state…typically $25-$125. The length of time to incorporate ranges from 1 day to 2 months, depending on the state and filing method.
The second and third components are to obtain a Tax Identification Number
from the IRS, also called your EIN (Employee ID Number) or FEIN (Federal Employee ID Number), and to create Organizational Bylaws
that provide rules and management guidelines for an organization and its directors. Bylaws take a few days to prepare with careful input from the organization, and your Tax ID Number (EIN) can be obtained online in just a few minutes. There are no state or federal filing fees associated with obtaining an EIN or creating Bylaws.
The fourth and final component of the 501c3 application process is to prepare and file IRS Form 1023
or Form 1024. This is by far the most complex and time-consuming step – even the IRS estimates 100+ hours of preparation time for a first time applicant. There is also a User Fee of either $400 or $850, depending on your organization’s projected annual revenue. Once completed, Form 1023 (or Form 1024) is submitted to the IRS for review along with signed copies of your formation documents, bylaws, Tax ID Number, and any additional schedules and notes. These documents together make up your organization’s 501c3 application packet.