Creating a nonprofit is a complicated endeavor and retaining experienced counsel to guide one through the process is a great advantage.
Non-profits are usually regulated by both the state and federal governments. For example, a New York nonprofit is required to file a state, federal, and (if located in NYC) a city tax exemption application. If a nonprofit owns real estate, it may be required to file for additional exemptions related to water and sewer charges. New York nonprofits must register with the Charities Bureau of the Attorney General’s Office and annually file forms with that office for every year the organization operates. Other requirements include setting up a bona fide financial management system, an employee management system, an established system for meeting mandatory insurance requirements.
Perhaps the most challenging federal requirement a nonprofit must satisfy to become a fully recognized not-for-profit organization under Internal Revenue Service Section 501(c)(3) is Form 1023 (for charitable, religious, and educational organizations), a massive application document that demands detailed information ranging from the organization’s purpose and makeup to its budgeting and fundraising practices. Nonprofits that identify as social welfare organizations may have to file From 8976. Other nonprofits file Form 1024.
In exchange for such intensive scrutiny, the nonprofit (and the entrepreneurs behind them) receives significant tax and business advantages from both the state and federal governments. Some of these advantages include drastically reduced tax liabilities, exemptions from certain cumbersome business filings, and even reduced postage rates from the United States Postal Service.
KabirMassey recently advised a set of entrepreneurs in NYC on establishing a nonprofit that met its statutory and regulatory requirements. We can guide you in figuring out the complex and often undeveloped procedures for starting your nonprofit.