Nonprofit Resources
Frequently Asked Questions
What should you consider before starting a nonprofit?
Before starting your nonprofit, you should be able to answer these questions:
What questions should you ask when starting a nonprofit?
Once you have your nonprofit idea ironed out, it's important to find the answers to these questions before you get started:
What paperwork should be filed annually with agencies?
Federal documents:
State documents:
What are the state and federal guidelines for starting an organization?
Federal guidelines
The Internal Revenue Service (IRS) requires the filing of either Form 1023-EZ or Form 1023 to be recognized as a public charity operating under Section 501(c)(3).
Form 1023-EZ is used for organizations with an operating revenue is no more than $50,000 within the first three years of operation. The fee to file the three-page Form 1023-EZ is $275.
Organizations with an operating revenue over $50,000 should file Form 1023. The fee to file the 18-30 page Form 1023 is $600.
The date of reorganization by the IRS is the date the Articles of Incorporation are filed with the state’s Secretary of State. Once an organization becomes incorporated with the state, it may begin operation, collect donations and operating revenue, and pay expenses.
Lobbying limitations
Public charities, recognized as an exempt organization by the IRS, are strictly prohibited from participating in a political campaign either by donation, endorsements, or public appearances.
Dissolution policy
A public charity should designate what Section 501(c)(3) organization should receive its remaining assets when it dissolves and has stopped operating. It may merely say “a Section 501(c)(3) organization,” as a specific organization may not be in business upon dissolution. A report of this intention to dissolve must be filed with the state’s Attorney General, who will request a certified affidavit stating how the remaining assets will be distributed to another public charity within the state.
What are the differences between for-profit and nonprofit organizations?
There are several differences, but the main difference is that for-profit organizations pay taxes on their profits and nonprofits do not.
Donations to public charity nonprofit organizations may be deducted from the donor's income tax return in many instances.
What are the differences between public charities and other nonprofit organizations?
Public charities may file either Forms 990-N, 990-EZ, or 990, while other nonprofits can only file Form 990.
What types of accounting systems are there, and what are the pros and cons?
Nonprofits should maintain accrual accounting systems to reflect accrual of revenue charged and expenses incurred. Depreciation must be maintained on capital assets purchased and put in use over a period of years.
What accounting statements are required at year-end for my nonprofit?
Accrual financial statements are required for year-end reports are a Form 990-N, 990-EZ, or 990 reflecting the balance sheet with assets, liabilities, and net worth, and an income statement reflecting the revenue, expenses, and net profit.
Before starting your nonprofit, you should be able to answer these questions:
- Who will you serve?
- How will they benefit?
- What programs will you be conducting, and who will be conducting those activities?
- Is there any special training or abilities required by the person or people providing your services?
- Where will you be operating?
What questions should you ask when starting a nonprofit?
Once you have your nonprofit idea ironed out, it's important to find the answers to these questions before you get started:
- How can the charity best serve others?
- What staff will be needed?
- What facilities will be used?
- Will any special equipment be needed?
- Should any charges be made for the services provided?
- What are the nature of expenses?
- What do you expect to be total revenue and expenses?
- Who will be members of the Board of Directors?
- Will a Board member have the ability to analyze financial records?
- Who will be the registered agent for the Secretary of State and what will the address be? (The registered agent is the person the Secretary of State can contact if they have questions about the organization.)
What paperwork should be filed annually with agencies?
Federal documents:
- Form 990-N for organizations with gross receipts less than $50,000
- Form 990-EZ for organizations with gross receipts between $50,000 and $200,000
- Form 990 for organizations with gross receipts higher than $200,000
State documents:
- Annual report with the Secretary of State
What are the state and federal guidelines for starting an organization?
Federal guidelines
The Internal Revenue Service (IRS) requires the filing of either Form 1023-EZ or Form 1023 to be recognized as a public charity operating under Section 501(c)(3).
Form 1023-EZ is used for organizations with an operating revenue is no more than $50,000 within the first three years of operation. The fee to file the three-page Form 1023-EZ is $275.
Organizations with an operating revenue over $50,000 should file Form 1023. The fee to file the 18-30 page Form 1023 is $600.
The date of reorganization by the IRS is the date the Articles of Incorporation are filed with the state’s Secretary of State. Once an organization becomes incorporated with the state, it may begin operation, collect donations and operating revenue, and pay expenses.
Lobbying limitations
Public charities, recognized as an exempt organization by the IRS, are strictly prohibited from participating in a political campaign either by donation, endorsements, or public appearances.
Dissolution policy
A public charity should designate what Section 501(c)(3) organization should receive its remaining assets when it dissolves and has stopped operating. It may merely say “a Section 501(c)(3) organization,” as a specific organization may not be in business upon dissolution. A report of this intention to dissolve must be filed with the state’s Attorney General, who will request a certified affidavit stating how the remaining assets will be distributed to another public charity within the state.
What are the differences between for-profit and nonprofit organizations?
There are several differences, but the main difference is that for-profit organizations pay taxes on their profits and nonprofits do not.
Donations to public charity nonprofit organizations may be deducted from the donor's income tax return in many instances.
What are the differences between public charities and other nonprofit organizations?
Public charities may file either Forms 990-N, 990-EZ, or 990, while other nonprofits can only file Form 990.
What types of accounting systems are there, and what are the pros and cons?
Nonprofits should maintain accrual accounting systems to reflect accrual of revenue charged and expenses incurred. Depreciation must be maintained on capital assets purchased and put in use over a period of years.
What accounting statements are required at year-end for my nonprofit?
Accrual financial statements are required for year-end reports are a Form 990-N, 990-EZ, or 990 reflecting the balance sheet with assets, liabilities, and net worth, and an income statement reflecting the revenue, expenses, and net profit.
Helpful Links
Center for Nonprofit Management
Offers a wide assortment of classes and resources to equip a nonprofit organization.
Guidestar
Look up other nonprofit organizations and see tax returns.
IRS.gov
A great source for tax returns and other nonprofit organization materials.
Offers a wide assortment of classes and resources to equip a nonprofit organization.
Guidestar
Look up other nonprofit organizations and see tax returns.
IRS.gov
A great source for tax returns and other nonprofit organization materials.
