The answer to this question is not a simple one. Over the years we have learned to be very careful about how we answer it.
When you do achieve tax-exempt status with the IRS, that status is retroactive to the date of your filing your articles in your state and picks up any donations that are made after the date of incorporation.that would seem to make it an easy answer.
But what about the person who tries to do the application himself or herself, or what if the person uses someone who is not experienced to do the application? What if the person fails to get tax-exempt status with the IRS? The IRS rejects lots of applications.
What happens then? Those donations would NOT be tax-deductible. That could be very unfortunate, possibly disastrous for the donor. And very problematic for you because you issued the tax-deductible receipt.
If you use our service to obtain your 501c3 status, you can give tax-deductible receipts as soon as you are incorporated. Why? Because we have a 100% success record with the IRS over 36 years. We would not take you on as a client if we felt there was a chance of your not receiving tax-exempt status.
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 thirty. We recommend an odd number to avoid a deadlock in voting. 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). Selection of directors is so important that in many cases, we spend time with our clients helping them choose. There are many factors involved. This is a good example of how valuable 36+ years of experience can be for you. It is not unusual after discussion to choose different directors than those originally in mind.
I’ve seen just about everything in my 36+ years of doing 501c3s. Here’s a brief story to keep in mind: A man operated a nonprofit organization for 16 years. He, his wife, and a third director comprised the board of directors (the IRS does not allow a majority of related directors today). When his wife divorced him, she joined up with the third director, and they removed him from his organization. After 16 years of sweat and toil in his own nonprofit, he was out in the street. Choose your directors wisely. And when you become a client, you may want to have a discussion about this.
No, they can live anywhere in the U.S. or reside abroad. They can be U.S. citizens or foreign nationals. However, if a majority of your board of directors are not U.S. citizens or U.S. permanent residents, then there are additional complexities. Please call for additional information.
Once we get a questionnaire back from you, it takes about a week to prepare your documents. We guarantee to send your documents to you within five business days or we pay you $200. States take varying amounts of time to file the Articles of Incorporation. After your application is sent to the IRS, it may be 2 months, 3 months or up to 8, 9, or 10 months before you receive your tax-exempt status (and sometimes even longer, especially if the IRS needs additional information from you in order to make its determination, but this is the exception). See our information from the IRS about how long it takes.
At the time of signup, there is not yet a tax-exempt entity to which you can make a tax-deductible gift and from which you can receive a tax-deductible receipt. So how can your fees be tax-deductible? Here’s the good news: We have a special legal document and procedure ($200 extra) that assures you the fees you pay us WILL be be tax-deductible to you (or whoever pays our fees).
Other than your corporate documents (Articles, Bylaws, etc.), we do not handle anything on the state level. State, county and city laws and regulations vary state by state, county by county and city by city. Normally, you should be able to handle them on your own. Likewise for state tax-exempt status (automatic or almost automatic for most states) Click here to see what your state requires for state tax-exempt status.
We e-mail you our Corporation Questionnaire and 501c3 Questionnaire(s). They are Word documents and consist of questions designed to elicit the required information from you. You type your answers right on the Questionnaires and e-mail them back to us. In this way, we get all the information from you to prepare all your documents. Of course, we give you guidance in answering the questions right on the questionnaires themselves (tips, pointers, helps, samples, suggestions, etc.), and we are also available by phone should you need additional guidance. With the 501c3 Questionnaire, where you will construct a narrative of your proposed activities, we also give you sample answers taken from cases that went through the IRS quickly and easily.
It is complex to secure nonprofit status, but once you have the status, it is surprisingly easy to do the bookkeeping in most cases. Financial tax returns are not required to be filed for nonprofit organizations until gross revenues are more than $50,000 per year. Presumably, at that point, you will be able to afford to have an accountant do your 990 informational return. There are no federal tax returns required for churches. Most states require no tax returns from the organization (California is an exception; there may be others). If you are a private foundation, the 990-PF is more complex. With any organization, you need to keep good track of income and expenses.
For most states, the cost if the same. There are five states where there is a surcharge on filing Articles (Arizona, Colorado, Mississippi, Nevada, New York). You would NOT pay this surcharge if you have already filed your Articles.
Be careful. There may be a problem lurking here. Tax-exempt status from the IRS is not something that can be passed around like a winter jacket.
If you are under someone else’s nonprofit, they are completely responsible for you in every way, especially including liability. So they will have to control you for their own protection. Is this something you want? Do they want the added responsibility and liability?
The IRS says that if you are going to be a subordinate organization included in a group exemption letter, you must be, in relation to the central organization, “subject to its general supervision or control.” Is that something you want? Will you truly be subject to the general supervision or control of that organization? Sometimes they just want a percentage of your income and then turn their head the other way. Be careful. You could be looking at problems with the IRS.
Good news! Not at all. These problems will not in any way affect our ability to get you incorporated and obtain tax-exempt status (possible exception for corporate bankruptcy for Arizona incorporation).
Incorporation and creating corporate documents are a job for a lawyer, not a CPA or a layman. A CPA normally cannot create corporate legal documents because he or she will not normally be a lawyer, too. Tax-exempt status is a job for a lawyer or CPA. Founder/Director David Marmon is a Harvard-trained lawyer, licensed to practice law in California (inactive), Kansas (inactive) and before the U.S. Supreme Court. He is not currently active in practice, and he does not give legal or accounting advice. The work we will do for you will not be done as a lawyer. We want to keep the cost down for you. We would have to charge you five times as much if we did our work for you as lawyers do.
A good lawyer friend sent us an e-mail stating, “We are quoting $8,000-$10,000 for fees for a simple nonprofit plus the costs. The most recent organization I worked on was an educational nonprofit which ended up paying close to $15,000….” Clients have come to us with quotes as high as $15,000 from lawyers they have contacted. (This was before the IRS greatly increased the paperwork for 501(c)(3) applications in 2006.) One lady said she had paid her lawyer $19,000 and she still didn’t have her IRS status. If you desire legal or tax advice, you should contact a lawyer or our CPA. We do not give you any specific legal advice.
If you have legal questions, you should consult a lawyer. We give you the benefit of 36+ years of experience, but we will not give you specific legal advice. We take you through the process of incorporation and tax-exempt status in a standard way We use the corporate legal documents, the Articles of Incorporation, the Bylaws, and other documents that we have developed since 1981 and that have been proven acceptable to the IRS. If later, you want to tailor your Bylaws to some specific need or desire (for example, to add an Advisory Board), you can amend them after the process is finished and you have your 501(c)(3) Determination Letter.
We can prepare corporate resolutions for you in a number of situations–to amend your Articles, amend your Bylaws, establish an Advisory board, change directors or officers, etc. But, again, we will not give you specific legal advice. We caution you to be very careful in making any substantive changes to our Bylaws. Be sure it is done by a competent corporate or nonprofit lawyer. Even then, he or she will need to be cautious to make sure of the ramifications in your state law of doing so. We know our Bylaws will pass all the requirements of your state law. Any change from those Bylaws may affect those requirements.
Different states call the basic organizational document by different names: Articles of Incorporation, Certificate of Formation, Certificate of Incorporation, Articles of Organization, Articles of Agreement, Articles of Association, or Charter. This is sometimes called the constitution of the organization. For simplicity, we call them Articles, or Articles of Incorporation. This is sometimes called the charter or constitution of the organization.
Yes. You can have your nonprofit office in your home, and your church or congregation can meet in someone’s home. Neither of these situations will keep you from getting tax-exempt status.To be classified as a school, you must have facilities where the educational activities are regularly carried on. If your school does not have facilities, it can still get tax-exempt status as an educational organization.
Actually, it’s only your state that can file your Articles. We prepare your Articles and cover letter to meet all your state requirements and e-mail them to you as Adobe PDF files. You print them out and follow our simple and precise instructions. We tell you how many originals and how many copies you need to mail and how to make out your check to your Secretary of State (may be a different administrative office in your state). Very easy. “Paint-by-the-number.”
You can obtain tax-exempt status for a nonprofit organization on the basis of a future plan. This is not true of church status. You must have a current operating church to obtain church status. Churches do not file any tax returns. A very small church, and/or one made up mostly of family members, may obtain 501(c)(3) status as a general religious nonprofit.
The IRS charges a $600 User Fee to process your application.
If your projected annual gross income for your first three years of operation is under $50,000 per year, then you qualify for Form 1023-EZ. For this, the filing fee is $275.
We e-mail you each Questionnaire as an MS Word documents. After saving the document, you type the answers right on the document and send us a reply e-mail, attaching the document to it.
From the time we receive your completed Questionnaires, we guarantee to e-mail your documents to you within five business days or we pay you $200. The five business days excludes weekends, U.S. national holidays and times our web site says we are closed.Since there are two sets of questionnaires (one for state and one for federal), this means that you can have all your documents back to you in barely more than a week after you get started (assuming you get the Questionnaires right back to us). Now that is fast! One person came to us around Monday noon and had sent both Corporation and 501c3 questionnaires to us by ten o’clock that night. We had all his documents to him by Friday. When I was practicing law, it was impossible to get anything out in a week (secretaries, paralegals, proofing, back and forth, etc.).
We prepare and send you the 501(c)(3) tax exempt application (Form 1023) and accompanying 501(c)(3) documents and applicable Schedules. You won’t see this documentation until it is time for you to date and sign. Using our instructions, you prepare any attachments and attach them to the Form 1023 along with your Articles and Bylaws (and any other documents we instruct you about) and your check for the IRS User Fee. With our simple instructions, you send off your packet to the IRS. It is rare that our clients have any questions on this because our instructions are so precise. But of course, we are always here to answer any questions that might come up.
Most often, when you send in your application to the IRS, that is the end of the process for you. You receive a letter acknowledging that your application has been received by the IRS. Then you wait until you receive your determination letter recognizing your tax-exempt status. However, depending on how clearly and completely you described your activities on the 501c3 Questionnaire, or how complex your nonprofit is, it is possible for the IRS to have additional questions for you. Usually doesn’t happen with our clients because we know what the IRS is looking for and how to structure your application so it is easy for the IRS to process and approve. . Responses to these questions enable the IRS to get a better understanding of your operations in order to determine that your organization is tax-exempt. Sometimes there are questions that were not asked on the Form 1023.
If they asked all the questions on the form that would cover every situation for the myriad types of nonprofits that the IRS handles, it would be a 100-page form. Therefore, it is not a negative if you get further questions from the IRS. If you get additional questions, you will prepare the answers and send them directly to the IRS (we give you a sample cover letter to use). If you don’t understand any question from the IRS or feel you need some direction in answering the question, we are here to help you understand it and guide you in the answer.
Normally, no. In complex cases, or in cases where you desire incorporation with formal (voting) members, we will decline to perform our incorporation service. We advise you to seek the services of a lawyer in such cases. A church/congregation with informal members (which is what we recommend) is never a problem. (Informal members may be called members, but they do not have voting control over the church/congregation.) However, even in the unusual event that we will not handle the incorporation for you, we can still handle the 501c3 process for you.
We put basic information on our web site for clients who so desire. Those who see your listing can find out basic information about your nonprofit and how to contact you. There is NO CHARGE for this service. Here is a link to the starting page.
Once we finish the process for you, we step out of the picture. You are completely independent. You are not under our “umbrella” or tied to us in any way. We email “Your Road Ahead” to you full of helpful advice for your use in the days and years ahead.
There are a number of ongoing services that we have added or are contemplating adding. Fundraising–donor acquisition, press releases to media, strategic plan/grants, charitable solicitation registration, ongoing state and IRS Compliance, and service provided by our CPA who can help you with 990s and other tax forms you need to file.
We can prepare for you various corporate documents (Unanimous Written Consent of Directors for Corporate Resolutions, Resignation of Director or Officer, Unanimous Written Consent of Directors to Set Time and Date for Annual Meeting of Board of Directors, Unanimous Written Consent of Directors to Change Location of Annual Meeting of Board of Directors, Unanimous Written Consent of Directors to Establish End of Annual Accounting Period, Waiver of Notice and Consent to Holding of Annual Meeting of Board of Directors, Minutes of Annual Meeting of Board of Directors, Waiver of Notice and Consent for Special Meeting of Board of Directors and Minutes of Special Meeting of Board of Directors).
We often get questions from former clients, and where possible we answer them or point them in the right direction. You are in our family of 2,500 clients that stretch all around the world. Stay on our mailing list to stay up to date on latest IRS developments and what is going on in our family.
We are removing this Q & A.
We take 2 steps for you. Step 1, we e-mail you our proprietary and personalized copyrighted Corporation Questionnaire and accompanying personalized and proprietary copyrighted documents. Step 2, we e-mail you our proprietary and personalized copyrighted 501c3 Questionnaire(s) and accompanying personalized and proprietary copyrighted documents.When we have taken Step 1 for you, that 50% is non-refundable. When we have taken Step 2 for you, the second 50% is non-refundable. These two steps are normally taken within 24-36 hours after signup. Please note that our refund policy is not set up for people who change their minds after they get started. “Be sure you’re right, then go ahead.” –Davey Crockett
You should be able to complete all your questionnaires in one day. The Corporation Questionnaire will not normally take more than about 45 minutes. (Add another 30 minutes to read our introductory material.) The 501c3 Questionnaire will normally take two to four hours (attachments and financials will take longer, but you can do those while we are preparing your 501c3 documentation.) Count on another hour or so if your organization is a church or school. Add more time if your nonprofit is very complex. You have two months to send us back your completed questionnaires. If you wish, you may extend this period for each questionnaire by paying $100 per month (extension fee). The same applies to paying any installment payments. If you have not completed both sets of questionnaires (Corporation and 501c3) by the end of six months (and made any payments due), we remove you from our database, and you have lost your investment.
We do not share or sell any information to third parties. We are not only a business but rather a 36+ year endeavor to help you help others through your nonprofit. We are an open and transparent community, and as such we freely share non-legal-non-confidential information within our 501c3 community, such as in newsletters.
We believe everything we do in life should be the best we can do and that your legal documents should not only be excellent from a legal point standpoint (most important), but also be aesthetic and pleasing to the eye. Generally, legal documents are pretty boring. At least, ours look good! (Exception: Articles of Incorporation and government forms have to follow a specific format and cannot be made to look good.) Take a look at our documents.
No problem. We incorporate and obtain tax-exempt status for people all over the world. That’s one advantage of doing everything by e-mail. Your directors do not need to be U.S. citizens nor reside in the U.S. However, if a majority of your board of directors are not U.S. citizens or U.S. permanent residents, then there are additional complexities. There are many facets, many factors, and many regulations if you operate your organization outside the USA. Please call us for additional information.
A Group Exemption Letter is given by the IRS to a central organization that has subordinates (or chapters) so that the subordinates or chapters do not have to file for their own 501c3 tax-exempt status. We do both the application for group exemption for the central organization as well as prepare the corporate and incorporation documents for the subordinate organizations. The Group Exemption letter can be useful for churches that wish to have “daughter” churches under a head or principal church (denominational model) as well as for organizations with many chapters, such as the Rotary Club or the Boy Scouts. Also good for sports organizations with many clubs throughout the country. Please call us for more information, including information about our fees.
People often think they should file their Articles of Incorporation in Delaware or Nevada because they have heard that these states are better to incorporate in. This is not true. If you have a profit corporation, then Delaware or Nevada can have substantial tax advantages. But there can be no tax advantages for a nonprofit, because there are no taxes! The disadvantage of filing in Delaware or Nevada is that you will have to relate to that state as well as to the state you are operating in. So you end up having to relate to two states. If you have filed in Delaware or Nevada but are operating in State X, you will have to register your Delaware or Nevada corporation in State X as a foreign (i.e., foreign to State X) corporation. You will have to file any annual or bi-annual statements in both states. What if you are operating in more than one state? The basic rule is that you must either file Articles in the state you are operating in or, if you file in another state, you must register that foreign corporation in the state you are operating in. In some cases, you may have the choice to file in either State X or State Y or State Z because you aren’t really operating in any state (foreign mission work, for example). In this case, we can tell you which states are most favorable to incorporate in. Not all states are equal!
If an attorney prepared your Bylaws, you can use them. Otherwise, use our Bylaws. We prepare Bylaws for all our clients’ nonprofits. We also prepare two other documents to accompany them: Unanimous Written Consent of Directors (or Trustees) Adopting Bylaws and the Certificate of Secretary re Adoption of Bylaws. If an attorney prepared your Bylaws, presumably he or she prepared these other documents for you as well. This doesn’t always happen, but you should have these two other documents. Then, if you prefer to use yours, the two documents—Unanimous Written Consent of Directors (or Trustees) Adopting Bylaws and the Certificate of Secretary re Adoption of Bylaws—can be used for the Bylaws that he or she prepared for you.
We’ve learned a few tricks in our 36+ years of helping you get through the IRS process. We’re sorry, but you’ll only find out about this one when you become a client of ours.
Higher income and/or assets means more complexity and more scrutiny from the IRS. This can result in more supplemental questions from the IRS and these questions tend to be more complex. It is also our experience that those of you whose nonprofit will have higher income and/or assets also have more questions for us going through the process. In both cases, we spend more time on your case.
Anyone who is serious about their nonprofit should never need an extension fee. You can finish your questionnaires in one day. We give you two months to finish your questionnaires. Countless people over many years have thanked us and said, “If it were not for the extension fees to prod us along, we never would have gotten it done.” Even though our process is as easy as possible, people tend to procrastinate—just a natural human tendency. We want to see your nonprofit get off the ground. We want to see you have success with your nonprofit. We give you a little incentive not to procrastinate.
But there is another reason for extension fees. We are on a moving conveyor belt. There are 50 states that are constantly modifying their service and constantly changing their policies, their fees, and especially their forms requesting changing information.
We must always be taking these changes into account. The IRS is also in a state of flux as they process a growing volume of applications and are continually updating their requirements. This means that our questionnaires must be constantly updated and improved. An out-of-date questionnaire will give us wrong answers. Also, we are constantly improving our process and making improvements. If clients were to use out-of-date questionnaires without these improvements, they would be more time-consuming to process. But worse, without using the latest questionnaires asking for the latest information, your answers would not be the best ones for your state and the IRS. Undoubtedly mistakes would occur because with the myriad of details involved, all it takes is for one thing to be out of place, and there is a mistake. Dealing with the states and the IRS, we don’t want mistakes.
A final reason is that people who take longer tend to let other things get in their way, and so the process gets more cumbersome, not only for them but for us as well. They lose the rhythm of he process, forget where they are in the process, have more questions for us. All this ends up being more time-consuming at our end, too.