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How to Start a 501(c)(3) Nonprofit Organization

You might be wondering why there are so many nonprofit organizations in the U.S. Is it because people are so magnanimous? No. It's because nonprofit organizations pull in huge amounts of money donated by generous people and the tax laws allow nonprofit executives to grant themselves huge compensation packages from these donations.

The IRS requires compensation packages for nonprofit executives (and other nonprofit employees) to be "reasonable". Fortunately, the IRS doesn't define reasonable. There are legitimate, charitable organizations whose executives make $250,000 and more. So if you want to be your own boss, receive a lucrative paycheck, and have no possibility of being laid off or fired, start a nonprofit organization.

Filing for 501c3 status requires time and organization. In some cases, it may be better to work with an existing organization and start a project under them or contribute to their existing projects, this will allow you time to focus on making the world a better place instead of the many administrative requirements detailed below. If it is the right business type for you, follow these steps to get your nonprofit up and running.

Creating a Nonprofit

Determine what type of nonprofit organization you want to create.

Choose an issue that is important to you or something that is a matter of public interest. Such issues may include arts, education, politics, religion, research or some other non-commercial endeavor. There are 29 types of organizations that can file for 501c3 tax exemption.

Types of 501c3 Organizations

Source: https://en.wikipedia.org/wiki/501(c)_organization check with your local Internal Revenue Service office.

Choose a name for your organization.

Although each state has its own set of regulations, you can expect three general rules to apply:

The name cannot be the same as the name of any other corporation on file with the state's corporations division.
About half of all states require the name to end with a corporate designator, such as Corporation (Corp.), Incorporated (Inc.) or Limited (Ltd.).
Your name cannot contain certain designations reserved for the state, such as United States, Reserve, Federal, National, Cooperative or Bank.

Apply for the name that you've chosen. Take the following steps:

Visit your state's filing office website or call your state's corporations division. Ask to see if the name is available or if it is already taken. If the name is available, then you can usually pay a small fee that will reserve the name for you until you've filed your Articles of Incorporation. If the name is taken, then create another name.

Formulate your mission statement.

As a nonprofit organization, you exist to accomplish your mission based upon your purpose, services and values. The mission statement is a concise expression that covers in one or two sentences the name of the organization, what it does, for whom it performs services and where it dispenses service. It should also portray how your organization is distinct from others like it.

Make your mission statement compelling. It will be used in all published materials, funding requests and public relations handouts. Use some of these mission statements as examples:

"The mission of St. Jude Children's Research Hospital is to advance cures, and means of prevention, for pediatric catastrophic diseases through research and treatment."

"The National Mental Health Association is dedicated to promoting mental health, preventing mental disorders and achieving victory over mental illnesses through advocacy, education, research and service."

"The National Consumer Supporter Technical Assistance Center's purpose is to strengthen consumer organizations by providing technical assistance in the forms of research, informational materials, and financial aid."

"The mission of Texas Mental Health Consumers is to organize, encourage, and educate mental health consumers in Texas. TMHC supports and promotes the mental health recovery process through peer directed and operated services, advocacy, economic development, and participation in public mental health policy design."

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