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We have some news, like BIG, BIG news! We are officially a 501(c)(3) non-profit recognized by the U.S. Internal Revenue Service (IRS)! What does this mean? Welp, it means that we can now accept monetary donations that are tax deductible as we are officially a public charity!
We literally could not be more excited about this news and we wanted to share a short, down and dirty post about how we got here with you.
I want to preface this post by saying we were not expecting to receive exemption status this quickly and this result is not typical from what I am told, so please keep that in mind if you are starting a 501(c)(3).
Let’s begin with a list of steps:
Research
Make critical decisions
Write and File Articles of Incorporation
Obtain an EIN
File with the IRS
Save lives
#1 RESEARCH
My husband and I knew we wanted to start a non-profit so we began doing research. If you go to Google and type in “How to start an animal rescue” the first site that will pop up will be BestFriends.org. This site is truly where I started as they had an article for every aspect surrounding animal welfare efforts. After realizing what it would take for us to run an animal sanctuary we decided to move forward.
Our research moved to “How to obtain 501c3 status?” About two hours into this research I was, let’s put this nicely…overwhelmed. The language itself was scary. This caused me to take a step back for a moment. I took a few days and my husband basically told me I had to get on the horse and get after what I wanted, so I did. I am really glad he supported me moving forward because in the end, it was much more attainable than I had built up in my head. After recognizing the steps we would need to go through, it was time to make decisions about our organization.
#2 MAKE CRITICAL DECISIONS
In the world of business and non-profits there are a lot of different words thrown around. Here are the ones that were throwing me through a loop:
FOUNDATION: A foundation is started by a small group of people who contribute their own money to the bottom line. The foundation is also controlled by this small group, more like a normal business. Keep in mind there are fewer tax deductions available to donors and there are increased requirements for tax filings with the IRS at the end of each year.
PUBLIC CHARITY: Public charities are funded by the public for the public. There are increased tax deductions available to donors and the tax filing may be easier to follow based on the amount the charity receives from public donations.
For us, we wanted to be a foundation by title alone. Using the word foundation in your title is not legally binding in any sense. This does not mean we were founded by a small group of people or that we not eligible as a public charity, it is just simply how we wanted to be referred.
Once you understand what you will be identified as but the IRS (foundation v. charity), you will need to form yourself as a business in your state. Find the business formation entity arm of your state (usually the Secretary of Stte) and read their requirements. For Virginia, this was simple, we knew we needed to be a Non-Stock Corporation. We had to create an account online with the Secretary of State and wrote our Articles of Incorporation. In Virginia they even have a form that you can use to write your Articles, however, the best decision for us was to write our own Articles. Let’s see how we did with that next.
#3 WRITE ARTICLES OF INCORPORATION
After reading examples of Articles of Incorporation and identifying the key articles needed (this will vary by state) we wrote ours. I started with the following template:
Nonprofit Corporation Articles of Incorporation
State of XXXXXXXX
INSERT TITLE OF ORGANIZATION
A NON-Profit Corporation
Pursuant to §INSERT STATUTE of the laws of the State of INSERT STATE, the undersigned hereby submit these Articles of Incorporation for the purpose of forming a nonprofit corporation.
ARTICLE 1. NAME
The name of the corporation is: INSERT TITLE OF GROUP.
ARTICLE 2. EXISTENCE
The corporation shall have perpetual existence.
ARTICLE 3. EFFECTIVE DATE
The effective date of incorporation shall be upon filing by the Secretary of State.
The corporation will not have members.
ARTICLE 5. TYPE OF NON-PROFIT CORPORATION
The corporation is not for profit and a Public Benefit Corporation.
ARTICLE 6. REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation is: INSERT ADDRESS INCLUDING COUNTY.
The name of the initial registered agent is: INSERT NAME, E-MAIL AND PHONE NUMBER.
ARTICLE 7. PRINCIPAL OFFICE
The corporation has a principal office. The street address of the principal office is: INSERT ADDRESS INCLUDING COUNTY.
ARTICLE 8. MAILING ADDRESS
The corporation’s initial mailing address is INSERT MAILING ADDRESS.
ARTICLE 9. DIRECTORS
The Directors shall elect their successors.
The names and addresses of the persons who are to serve as initial Directors until their successors are elected and qualified are: INSERT NAMES AND ADDRESSES.
ARTICLE 10. INDEMNIFICATION
The corporation does indemnify any directors, officers, employees, incorporators, and members of the corporation from any liability regarding the corporation and the affairs of the corporation, unless the person fraudulently and intentionally violated the law and/or maliciously conducted acts to damage and/or defraud the corporation, or as otherwise provided under applicable statute.
ARTICLE 11. PURPOSE
Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue code, or corresponding sections of any future federal tax code.
The purpose of the corporation is exclusively for charitable purposes, including, all those activities, work and objectives as related to XXXXXXXXX and include, but are not limited to the following primary purposes:
1. XXXXXXXXX
2. XXXXXXXXX
ARTICLE 12. PROHIBITED ACTIVITIES
No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Eleventh hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
ARTICLE 13. DISTRIBUTIONS UPON DISSOLUTION
Upon the dissolution of the corporation, after paying or making provisions for the payment of all the legal liabilities of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a court of competent jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said court shall determine which are organized and operated exclusively for such purposes.
ARTICLE 14. INCORPORATORS
The name and address of the Incorporator is: INSERT NAME AND ADDRESS INCLUDING COUNTY.
ARTICLE 15. BY-LAWS
The Directors shall have the power to adopt, amend or repeal the By-Laws of this corporation. The By-Laws shall govern the operation of this corporation unless any By-Law conflicts with these Articles of Incorporation, in which case the Articles of Incorporation shall be controlling.
_____________________________________
Signature
INSERT DATE
Feel free to use this template to use for yourself. Customizing your Articles to your organization's needs (i.e. do you want members? what is your purpose?) will require some research on what your state requires, so be sure to start there.
If you are going to for non-profit status with the feds you MUST include specific language. The IRS will reject you as a 501(c)(3) applicant if you do not have the language, so don’t forget it:
First: The name of the Corporation shall be ____.
Second: The place in this state where the principal office of the Corporation is to be located is the City of _____, ____ County.
Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name _____ Address _______
Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.
As you can see from the template it does not matter where you place the required language in your Articles of Incorporation, just so long as you have the language.
After you have reviewed and edited your Articles you can submit them with your application and fee (will vary by state) to your state business formation entity. Now that you have filed as a business you need to obtain an Employee Identification Number (EIN).
#4 OBTAIN AN EIN
This is super simple. Go to the IRS EIN Online Assistance and click “Begin Application.” The IRS has laid this out very easily. Follow the instructions and at the end you will be given an electronic letter with your EIN on it. Print it and don’t lose it!
#5 FILE WITH THE IRS
You are so close to the end - just a fe more steps!
Up to this point you have prepared yourself for the IRS filing. If you plan on starting small read the Instructions for the 1023-EZ. The instructions are long, but they are worth it. They have a worksheet that will tell you if you are eligible to file the EZ form, if you are, this will save you a lot of time and energy (hence, the EZ). The Ruffugees Foundation used this form as we knew we would be starting small and growing over time.
Once you are ready to file you will be directed to Pay.gov. This is where you will fill out the final forms, answer questions, agree to the terms and pay your fee. Since we used the 1023-EZ our filing fee was $275. We obtained our letter stating we were official just 14 days after filing. I have no idea how this happened, but clearly we landed on a very efficient desk that day. I was truly expecting it to take upwards of eight months, so prepare yourself for that if you are filing.
This is our down and dirty version of how to file for non-profit status, but this is only the first step! We have so much to do now with the responsibility of being a federally recognized public charity. We do not take this lightly. We are ready to help animals, rescues and shelters in need and we need your help to do so! If you would like to make a tax deductible donation to The Ruffugees Foundation, click here or make a donation by mail to The Ruffugees Foundation, P.O. Box 840, Garrisonville, ?VA 22463.
Please share with us your stories and experiences in starting a non-profit. If you need help, too, please feel free to reach out!
See you on the wild side,
Danielle