What is a 501(c)3?
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A 501(c)3 is type of incorporation that is used to set up a charitable corporation. A charitable company is a type of company that is set up with the intention of providing a service to the community, rather than making a profit. Incorporating a company makes it a legal entity, responsible for its actions in the community. This is important, as it removes a great deal of the responsibility from the person who is starting the company. If you start a 501(c)3 company, you want the legal liability for possible damages to be the responsibility of the 501(c)3 corporation so that your personal possessions are safe from creditors.
Rules for forming a 501(c)3 corporation vary across every state, so legal and financial advice should be sought before using a 501(c)3 incorporation. Costs for forming a 501(c)3 corporation vary with the size of the corporation, increasing with the size of the organization. The 501(c)3 designation is a reference to the section in the Internal Revenue Code that deals with charitable corporations. This is a very dry document, which may explain why such an unwieldy and unimaginative name is used for this type of organization.
501(c)3 corporations are exempt from paying income tax. In return for this exemption status, a 501(c)3 corporation may not take part in election campaigns in an attempt to cause one candidate to be elected in preference over another. 501(c)3 corporations are also prohibited from providing any monetary or material benefit to the principle or principles running the organization. These restrictions are for the entire life of the organization.
A corporation is either a 501(c)3 organization or it is not. It cannot change its function. If the organization ceases to be a nonprofit charitable organization, than the organization must be dissolved.
501(c)3 corporations are an important means to allow individuals to set up organizations with the intention of the betterment of the community at large, without undue risk to personal wealth. 501(c)3 corporations also allow charitable organizations to grow to a sufficiently large size that they are able to cause significant change. In effect, the organization can grow beyond the individual who started the organization, and even outlive him or her.
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What are the pre-requisites regarding unemployment? Do we have to provide it for deployed personnel and if we do is that OK? - anon42884
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My 501c3 needs to change its web site from .org to .net and also the e-mail addresses for its members. Do I need to notify the federal government or NJ state government of this change? - anon39601
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If a 501c has its charter pulled by a national organization, the real property and assets must be donated to another 501c. If there are no designated trustees, who has the right to make this donation and who has control until this donation is made? - anon39567
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I am interested in finding out what funds raised through a charity organization can be used for and what they cannot be used for? - anon19489
Editor's reply: It's always smart to check out a charity before donating your time or money to it. Our articles, "What is the BBB Wise Giving Alliance?" and "What Should I Consider When Donating to a Charity?" have more information on the subject.
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I found answers to my own question. Even if you make less than $25000/annum, you have to file for 501c3. But if you don't expect more than $5000/annum, you don't have to file for 501c3. In the former case, the tax form to be filed after receiving the 501c3 status is 990-N online form.
Regarding not being able to drop any child from the team, I don't think that is true. Whatever your tax exempt purpose is, you have to state that and follow it. For the form f1023, just google f1023 and the first result will be from the IRS website. Same goes for the instructions to it - i1023. This document includes who can apply and what they need to do retain their status
- littleredbug
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I have reason to believe that a 501(c)(3) organization in the area is not running their soccer club in the manner which is determined by their 501(c)(3) status. They presently have no treasurer (and have not had one for the last 12 months), there are no regular board meetings, no minutes have been taken for the last 18+ months, they owe money to many creditors and have a president who uses his own personal money to fund the organization (during cash flow problem periods) and then writes himself/signs a check from the 501 company back to his own personal or business account without presenting any form of documentation to support the fact that he put the money into the 501 company in the first place. There are so many more operating and financial irregularities. Questions:
How do I get access to this club's financial records (including copies of their check register etc)? Where do I find details of how a 501 (c)(3) organization should be operating and what their reporting procedures are supposed to be (i.e., how should a board conduct itself, what changes should they report to the IRS, can they operate without a treasurer)? - anon10874
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Does a charitable organization that has gross receipts of less than $25,000/annum have to file for 501c3 so that it's not taxed by the federal government?
Our organization was registered in Maryland and we file an exemption form with the State of MD every year. We don't have 501c3 yet. Do we have to pay taxes if we don't file it within 27 months of our inception? - littleredbug
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My local boys and girls track club is seeking 501(c) status, but as a youth sports team we were advised that we would no longer be able to cut anyone from our team if we achieve this status. Is that true? Must we keep every child who attempts to join our organization regardless of ability and behavior? - anon4868
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My question is about the tax exempt status of the 501c3. We lease a space to a corporation that is a 501c3. Under the lease, they are responsible for additional rent in proportion to their % of the leased space, which includes real estate taxes. However, this tenant had advised me of their 501c3 status.
Are they exempt from paying real estate taxes? - TMallette
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Written by
John Sunshine
Last Modified: 24 August 2009
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