Starting a nonprofit is a powerful way to make an impact, but securing 501(c)(3) tax-exempt status is crucial to maximizing your organization’s potential. With tax-exempt status, your nonprofit can receive tax-deductible donations, qualify for grants, and reduce financial burdens. However, the process can be complex. In this guide, we break down the step-by-step process to help you navigate the application smoothly.
Step 1: Establish Your Nonprofit Structure
Before applying for 501(c)(3) status, you must legally form your nonprofit. This includes:
✔ Choosing a unique name for your organization.
✔ Filing Articles of Incorporation with your state.
✔ Defining a mission statement that aligns with charitable, religious, or educational purposes.
✔ Appointing a Board of Directors to oversee the nonprofit’s operations.
📌 Tip: Your Articles of Incorporation must include a dissolution clause, stating that assets will be used for tax-exempt purposes if the nonprofit closes.
Step 2: Obtain an EIN (Employer Identification Number)
An EIN is like a Social Security Number for your nonprofit. It’s required to open a business bank account, file taxes, and apply for grants. You can apply for an EIN free of charge on the IRS website.
📌 Tip: Even though your nonprofit aims to be tax-exempt, it still needs an EIN for identification purposes.
Step 3: Create Bylaws & Hold an Organizational Meeting
Bylaws are the rules that govern your nonprofit. They should outline:
✔ Board member roles & responsibilities.
✔ Decision-making procedures.
✔ Conflict of interest policies (a required IRS document).
After finalizing the bylaws, hold an organizational meeting to officially adopt them and document board approvals.
📌 Tip: Keep minutes of this meeting as they may be required during the 501(c)(3) application process.
Step 4: Complete IRS Form 1023 or 1023-EZ
To apply for 501(c)(3) tax exemption, you must submit either Form 1023 (long form) or Form 1023-EZ (simplified version) to the IRS.
✔ Form 1023: Required for larger nonprofits with expected annual revenue over $50,000.
✔ Form 1023-EZ: A shorter, online application for nonprofits with expected annual revenue under $50,000.
📌 Tip: Double-check eligibility for Form 1023-EZ. Filing the wrong form can delay your approval.
Step 5: Submit the Application & Wait for IRS Approval
Once submitted, the IRS reviews your application to determine if your nonprofit qualifies for tax-exempt status.
⏳ Processing Time:
✔ Form 1023-EZ: 2–4 weeks
✔ Form 1023: 3–12 months
📌 Tip: If the IRS requests additional information, respond promptly to avoid delays.
Step 6: Maintain Compliance & Keep Your Tax-Exempt Status
After approval, your nonprofit must follow IRS regulations to maintain 501(c)(3) status:
✔ File Form 990 annually to report finances and activities.
✔ Keep operations aligned with your charitable mission.
✔ Avoid excessive political activity and private benefit transactions.
📌 Tip: Failure to file Form 990 for three consecutive years can result in losing your tax-exempt status.
Need Help with Your 501(c)(3) Application?
Filing for tax-exempt status can be overwhelming, but Livewell Financial Services, LLC is here to guide you through the process. We’ll ensure your application is accurate, compliant, and approved smoothly.
