I would like to know how much time and money is involved in starting a not for profit corporation.
The corporations purpose is to buy a house to be rented out to fraternity members at a college.
I know this is possible, because after some googling I have found many web-sites for not for profit fraternity and sorority housing corporations.
But, after looking at this thread it seems that even starting a regular corporation can costs a significant amount of money up front, with more annually. I would think that even more red tape is involved in non-profits.
Is there a difference between a charity and a non-profit corporation? This isn’t a charity, no funds will be collected for charitable things. The only purpose is as a landlord.
Anybody have some good resources to recommend for learning more about this?
After some more research I have found some of the required forms for this:
IRS Election by a small business
IRS Employer ID #
IRS Tax exempt status. - This is the big one.
They are all .pdf’s from the IRS web pages with forms for getting a non-profit.
One specific question that I cannot seem to find out is the cost of doing this. I know that a lawyer would charge for the time required to fill out the forms, but is there a flat fee charged by the IRS to apply for tax exempt status?
Also, I am seeing lots of web sites that have easier versions of the forms to fill out. They then fill in the correct IRS forms with your info and pass it along for a fee of a few hundred bucks.
Here are some examples:
It’s all based on state law and can vary greatly. However, there is (I’m speaking very generally here) typically less expense involved in setting up a non-profit than a profit-making enterprise.
Generally the basic requirements are that you have Articles of Incorporation and Bylaws, that you have some “incorporators” to sign the documents, that you have an annual meeting, and that you pay a fee to your state business registration agency. Oh, and that you don’t keep any profits.
A “charity,” as that term is typically used in U.S. law, is an organization of certain specified types which is in the business of providing social goods and to which persons can make tax-free contributions under Sec. 503 of the Tax Code. A non-profit is not the same thing. Donations made to a non-charitable non-profit (which it sounds like is what you’re looking to start) are not tax-deductable. However, under most circumstances non-profits do not have to pay income tax. (There are exceptions, though, and non-profits usually have to file a return with the IRS the same as people or profit-making entities.)
There is probably a website for your state’s Department of State, Department of Corporate Affairs, or Business Registration Office which has more information.
I have noticed this difference between “charity” and “non-profit”. Two examples are the NRA and the ACLU. Both are non-profits, which do not pay taxes, but donations to them aren’t tax deductible.
Also, however, both orgs have foundations associated with them that are charities. So, if you want to leave a tax deduction donation with them you can.
Yes, for my purposes, I just need a non-profit. The forms are intimidating, but I think this can be done by a layperson who is willing to spend some time on it.
The company I work for is a non-profit corporation, but is not a charity. We can’t accept donations at all, in fact - we charge at a substantial margin for all our services. However, the corporation has no shareholders - it’s an association - and so nobody profits from it.
There are a number of ways of being a “not-for-profit” organization. Under 501©(3), your organization is exempt from paying income taxes, and individuals who make contributions to your org can deduct those conributions. Under 501©(4) (I think), your org is exempt from income taxes (like the NRA or League of Women Voters) but contributions to your organization are not tax-deductible to the individual smaking the contributions.
The costs for receiving 501-status from the IRS are about the same. For very small organizations (say, under $25,000 budget each year), the costs are minimal, around $150. There are also some costs for having an accountant who knows what he/she is doing, of course, although some accountants will donate their time to help worthy causes.
It’s not money as much as sanity that it will cost you.
I’ve blocked a great deal of my experience with starting a non-profit corp.
Anyway, from the not so horrible parts that have leaked through… check with state and local laws. (In my state, almost everything is on the web). They will tell you how to start a corporation. At the same time, check with the IRS on whether or not you can obtain status as a non-taxed corporation. (This was one of the more pleasant parts of the experience, actually, the IRS office in my area gave periodic seminars to people who wanted to start non-profits on how to file, what papers to file, and who to talk to, what to do, etc. They were very helpful. I’m not sure if this is true across the country, but it’s worth looking in to.)
There are also books that will walk you through the process and have generic examples of the documents you’ll probably need to file.
Thanks for the info everyone. I’ve got a growing stack of papers now to fill out.