Starting a nonprofit provides the community it will serve benefits and advantages, as well as, the individual(s) building the nonprofit. Typically, a 501(c)(3) nonprofit organization is formed to serve religious, charitable, educational, scientific or literary purposes. To be granted nonprofit status, your organization must meet the requirements set by the Internal Revenue Service.
The Three Different Types of Nonprofits
Nonprofit organizations come in a variety of shapes, sizes and industries. Still, there are clear and distinct regulations the IRS uses to decide whether or not an organization should be classified as a tax-exempt nonprofit corporation.
Here are the three different types of nonprofits in California:
Religious: If you wish to be classified as a tax-exempt religious nonprofit, your organization will have to meet the guidelines and qualifications set forth by the IRS. Mainly, a religious nonprofit must publish a newspaper devoted to their recognized religion; and also conduct religious retreats at no charge to their members.
Mutual: Narrowly defined, a mutual-benefit nonprofit serves a specific group of people rather than the community at large. A good example of a mutual benefit nonprofit is a homeowner’s association or a local chamber of commerce.
Public Benefit: As the most common form of nonprofits, a public benefit organization is used to serve a specific community, provide social services, or educational benefits – just to name a few. And since this categorization can be used for a wide variety of purposes, it creates limitless possibilities for what you can do within your organization for the benefit of the whole community.
Choosing what type of nonprofit to start, which forms to fill out and eventually gaining tax-exempt status from both the state and federal government can seem like a daunting task. But with the right knowledge and preparation, you can get your nonprofit going in less time than you ever thought possible.
Can Your Organization be a Nonprofit in California?
To start a nonprofit organization, you must follow the series of steps listed below:
- Choose a Name
- Appoint a Director(s)
- File Articles of Incorporation
- Prepare Your Bylaws
- Create a Conflict of Interest Policy
- Apply for an Employer Identification Number (EIN)
- Hold Your First Meeting
- Keep Detailed Records
- Obtain Federal and State Tax Exemptions
This list is not exhaustive, and you will likely have to take further action to gain official nonprofit and tax-exempt status through the state of California. However, this should give you a good idea of what you need to do to make your nonprofit dreams come true!
The Greater Good
Perhaps the most rewarding part of starting a nonprofit is getting to meet so many like-minded people who also desire to serve and help their community. And just remember, all you need to be successful is a little bit of determination, a lot of passion and a few helping hands along the way.
Our nonprofit audit services give our clients helpful feedback which will help them improve their financial reporting and audit process. If you have any questions about our nonprofit services, one of our CPAs would be happy to speak with you at (925) 933-2626 or, email us at email@example.com.