A 501(c)(3) NPO is exempt from income and at times property tax such as if you owned either commercial property or a house on the waterfront that will be used for the headquarters of your non profit organization while it is able to accept tax-deductible charitable contributions. This is a strategy that some groups / organizations pursue since quite frankly, those who own waterfront property whether it is oceanfront, lakefront, or even sometimes riverfront end up paying much higher taxes than the rest of the property owners whose lots are not waterfront. Not only will you have a great view, but your non profit organization gets a tax benefit simply because of its waterfront location.
Though some opt to create a 501(c)(3) NPO with the help of an attorney, it is possible to establish this type of non-profit without one as there are scores of books and resources on the Internet which provides the necessary information and forms required to get one going.
Here a quick primer / overview of the necessary 10 steps in creating a 501(c)(3):
1. Formulated a compelling mission statement, one or two sentences that covers who the organization is, what it accomplishes and for whom and where. It should be included in all published materials, press kits and funding requests.
2. Form a Board of Directors, and know that each state has regulations that detail the minimum size of the board, so get informed. And choose carefully – identify qualified individuals who share in your mission and are willing to give of their unique talents and time.
3. File Articles of Incorporation. These official statements of creation, filed with your state’s agency, protect both board and staff from liabilities, if any, incurred by the organization. In other words, the corporation is liable, not the individuals and officers who work for the company. Get all the state-specific information that you need at your state’s Attorney General’s office or tate Secretary’s office.
4. Draft bylaws, which are “rules” by which the organization operates. Though not a 501(c)(3) status requirement, bylaws will help you in the governing of your company.
5. Create a budget. A good place to start is by looking at potential income – and then figuring out how much money you have to spend. With budget creation in mind, develop a bookkeeping / accounting system that meets your current and anticipated needs as well.
6. File for 501(c)(3) status (Form 1023) from your local IRS office, which is required to apply for recognition of tax-exemption and to obtain public charity status.
7. Apply for a federal employer identification number (EIN). Even if you don’t have employees, NPOs are required to Regardless of whether or not you have employees, nonprofits are required to obtain an EIN. Ask for Form SS-4 when applying.
8. File for state and local tax exemption.. You can do so via your state’s Department of Revenue, your county, municipal or local Departments of Revenue, and county or municipal clerk’s offices.
9. Fulfill charitable solicitation law requirements. For example, if your organization plans on fundraising, know that many states regulate organizations that solicit funds – compliance usually involves obtaining a permit or license, then filing an annual report / financial statement. Again, get informed with your state’s requirements.
10. Apply for a nonprofit mailing permit. Often overlooked, the federal government provides subsidies for nonprofits by offering reduced postage rates on bulk mailings (second- and third-class rates). Contact the U.S. Postal Service to receive Publication 417, Nonprofit Standard Mail Eligibility.
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