How to Start a NonProfit: 501c3 Application & State Registrations

501c3 Tax Exemption
This is the fourth part in a five-part series on how to start a nonprofit organization. Keep in mind that the sequence in which you complete these tasks may vary, but each is important.  This post will explore the steps involved in applying for 501c3 tax exemption and state and local permits.

501c3 Tax Exemption

1. Prepare IRS Form 1023 – Application for Recognition of Exemption: Most organizations will need the help of a nonprofit advisor, cpa, or attorney to prepare F1023.  After filing, you can expect to wait 2-5 months for the IRS to respond with either a denial, a request for more information, or your Letter of Determination.  Keep in mind that once you’re approved, your tax exempt status is retroactive back to your incorporation date.  For affordable F1023 assistance, contact Nonprofit Elite.

2. Submit $400 or $850 application fee, depending on your projected annual revenue over the next three years: Your application fee is $400 if you’re projecting less than $10,000 in revenue during any one of the next three years.  If you project $10,000 or more, your application fee is $850.

State and Local Applications

1. File Charitable Solicitation Registrations in each state in which you engage in fundraising activitiesCharitable solicitations registration is required in 40 states.  Before you engage in any type of solicitations in these states, you must register your organization using the appropriate form.  Most organizations that need registrations in multiple states will use a charitable solicitations registration service such as Nonprofit Elite, due to the complexities of each form.

2. Apply for state sales tax if necessary: Once you have received your Letter of Determination from the IRS, check with your state to see if there are state tax requirements.  If you have already been approved as a 501c3 organization, this process is not difficult.

3. Apply for city and county permits and licenses as required – varies by county and organizational activities: As far as we know, there is no published list of cities and/or counties that require specific fundraising permits or licenses.  To make matters worse, cities change their laws all the time.  Do your best to check with each city and county in which you plan to raise money, or contact us for assistance.

  1. Please i want to know specifically the exact period i can get my determination letter. And the atorney that can process it for my organisation.
    Thank you.

    • Hi James, We can certainly help. Give us a call at 817.726.3873. Ask for Ben, and we can answer your questions and go over how all of this works.

  2. Thinking of starting a nonprofit in Training and Development. Will not have any income for 2 years. What are my yearly costs? I am thinking of incorporating in Delaware and branch out to other states. These are my initial questions, LOL.

    • Hello John, Most of your fees will be startup costs such as incorporation in your state ($25-$200) and the IRS Form 1023 User Fee ($275-$600). Assuming you have revenue less than $50K during your first few years of operations, you will be required to file IRS Form 990-N annually. There is no fee for this filing if you do it yourself, or a minimal fee if you choose to have it completed for you.

      Please contact us at 1-800-268-4388 or to discuss in more detail. We’re glad to help!

  3. Thanks for replying. Something to think through and probably will touch base at a later date.

    Thanks again.

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