Can You Start a 501c3 by Yourself?

Jan 29, 2024 

Can You Start a 501(c)(3) Organization by Yourself?

Disclaimer: Although we do not provide legal advice, we can assist you with your filings and corporate documents and help you apply for 501(c)(3) status under the Internal Revenue Code (IRC). Visit our service pages to find out more about what Pearl Solutions can offer. 

You want to create a nonprofit or mission-driven organization. That means you’re likely interested in applying for 501(c)(3) status. 

If that’s the case, you now have to make an important decision: Do you try to do all of that work by yourself or do you tag in a team of experienced experts who can help you navigate the process? 

Working With Pearl Solutions vs. Moving Forward Without Professional Support

Can you start a 501(c)(3) by yourself? Absolutely. Many people choose to set up their 501(c)(3) organizations on their own. 

As you’ll see below, there are many steps* involved in this process. That’s why we believe that you should bring on experts who can confidently guide you along the way. Working with a team of dedicated and knowledgeable professionals will save you time and help you avoid costly mistakes.

Learn more about our grant writing services

Brief Overview of 501(c)(3) Tax-Exempt Status

Before we talk about forming a 501(c)(3) organization, we want to make sure we’re on the same page about what we mean by the 501(c)(3) designation. What is a 501(c)(3) organization? What does it mean when you say you want to have 501(c)(3) status? 

As explained in this blog post, when you apply for 501(c)(3) status you’re applying for tax-exemption status under section 501(c)(3) of the Internal Revenue Code (IRC). There are many benefits to applying for and maintaining this status. Notably, donations to your organization would likely be tax-deductible. 

Steps to Starting a 501(c)(3) Organization

Before you can apply for 501(c)(3) status, you must:

  • Choose a name. 
  • Write the Articles of Incorporation.
  • Create bylaws.
  • Apply for an Employer Identification Number (EIN).
  • Appoint board members and officers.
  • Submit IRS Form 1023 or Form 1023-EZ for tax-exemption determination.
  • Obtain necessary licenses and permits.
  • Complete state registration requirements.

Keep reading to learn about each of those steps. 

Choose a Name for the Organization.

This might be the easiest part of the process for you, especially if you’re good at creating clear and meaningful names for organizations, campaigns, or products. 

If you need some help thinking of a name, we recommend that you think about:

  • Other nonprofits that support your cause
  • The cause itself
  • The people involved in the work you do

For example, let’s say you want to start an animal welfare organization. We recommend looking at other nonprofits that are dedicated to the same cause. 

What other nonprofits support animals and how do they do that? Think broadly: Do they build shelters? Do they work with shelters to promote adoption? Do they offer free spaying and neutering services? Then get specific: If you’re focusing your efforts on pitbull rescues, look at other organizations that focus on pitbull rescues. What are those organizations named? 

Make sure you think beyond your local area. Which national organizations have earned people’s trust and successfully carried out their missions over several years or even decades? What do you think they’re doing right? How do their names communicate their goals? For this cause, that would mean looking up organizations like the American Society for the Prevention of Cruelty to Animals, The Humane Society, and Best Friends Animal Sanctuary. 

Once you’ve done that, think about animal welfare at the broadest level. Why is it important to you? What words and phrases come to you when you think of the cause? For example, some people think of animals as their best friends. That might have inspired the founders of Best Friends Animal Sanctuary. Think about what inspires you and keep a list of those words or phrases that come to mind. 

Now think about the people involved in your cause. Are you creating this organization to honor a child’s pet or a local activist who has supported animal welfare over the course of their lifetime? Are you working to support animals in one city or region? You may want to include that information in your name. 

Finally, we believe that the best names clearly communicate what you do and/or why you do it. One easy way to help your future supporters find your organization is to tell them who you are right off the bat. For example, the American Society for the Prevention of Cruelty to Animals has a name that notes the population it serves (America), what the cause is (animals), and what they’re specifically working to do (prevent cruelty).

Don’t worry about not having a “fun” or “cute” name. You can still incorporate that kind of energy and language into your marketing campaigns and in how you talk about your work.

So, based on the above, what would you name your organization? Your list may look something like this:

  • Penny’s Pitbull Rescue 
  • Springfield’s Pet Rescue Organization
  • Fighting For Ferrets 
  • Cat Ladies For Kittens
  • Be Their Best Friend Animal Adoption Services

One final recommendation: While your organization’s name is important, you don’t want to waste valuable time agonizing over the perfect one. That’s another reason why it’s great to have an expert or team of experts helping you in the nonprofit development and creation process. 

Learn more about the services Pearl Solutions offers.

Write the Articles of Incorporation.

In order to achieve 501(c)(3) status, the IRS requires that you submit things like your articles of incorporation (sometimes known as an organizing document). According to the IRS, an organizing document is defined as the “trust instrument, corporate charter, articles of incorporation, articles of association, or other written instrument by which the organization is created under state law.” 

A charity’s organizing document must meet these requirements. A private foundation’s organizing document must meet these requirements. We’ll get into the distinction between a charity and private foundation below. For now, here is additional information for private foundations here and public charities.

Create Bylaws for the Organization.

You’ll also need to create bylaws. These are the internal rules everyone in your organization must follow. While the federal government doesn’t require specific language in your bylaws, your state might

Apply for an Employer Identification Number (EIN).

All businesses have to apply for an EIN. This is so the IRS can easily identify them. 

You’ll need to apply for an EIN even if your organization won’t have employees. To apply for your EIN, you need to file Form SS-4.

Appoint Board Members and Officers.

Another important decision to make during this process is who is going to help you run the organization. This means choosing your board members and officers. 

Your board members and officers should fall under at least one of these areas: 

  • Dedicated to your cause
  • Emotionally invested in the success of your organization
  • Experienced in running a nonprofit, organization, or business
  • Qualified to mentor you as you run your nonprofit

It goes without saying, but we’ll say it anyway: You should only appoint people to the board if you’re confident that they will fulfill all of their duties. When asking people to join, make sure they’re aware of what role they’ll play and what is expected of them. 

Finally, make sure you check to see if there are any state or federal requirements. Do you need a certain number of board members? Can they be related? Are there any residency requirements? What are the terms? What is quorum? These are all things that you’ll need to consider.

Submit IRS Form 1023 or 1023-EZ for Tax-Exemption Determination.

There are lots of numbers to remember when it comes to operating a nonprofit. When you’re looking to apply for tax-exempt status, the one you need to remember is 1023. 

Form 1023 is the form you submit to apply for that status. Form 1023-EZ is a streamlined version of that form. 

Obtain Necessary Licenses and Permits.

The licenses and permits you need to obtain will be based on your organization’s activities. You may be required to obtain licenses and permits on the federal and state level. This resource from the U.S. Small Business Administration is a good place to start when learning which ones apply to your organization. 

Complete State Registration Requirements.

As mentioned above, you also need to find out what your state requires you to do in order to operate in compliance with their laws.  

Financial Management Considerations for Nonprofits

Here are a few considerations for managing your nonprofit’s financials. 

Maintain Separate Bank Accounts for Business Operations. 

Make it easy on yourself, your accountant, and potential auditors and keep separate records you can easily review. One way to do this is to set up a bank account specifically for the nonprofit. 

Donations/Contributions

In most cases, if you achieve and maintain 501(c)(3) status, donations to your organization will be tax-deductible. Keep in mind that this means you will likely be obligated to disclose donor names and donation amounts.

Prepare Annual Operating Budgets.

Speaking of donations, how much revenue do you expect to bring in each year? In order to adequately fund your initiatives and pay your team, you need to prepare a realistic annual operating budget. This will enable you to keep track of your spending and adjust your marketing efforts or operations accordingly. This will also be good to have on hand in case the IRS wants to review your budget. 

Create Policies Regarding Expenditures.

As you know, you can’t just focus on revenue. You also need to think of your expenditures or expenses. When creating your policies, think about:

  • Who can spend money? 
  • How do they do that? 
  • What approval do they need before they make a purchase? 
  • How do they report on their spending? 

Ask an accountant or lawyer what they recommend and look up policies that other organizations have put in place.

Private Foundation or Public Charity?

Did you know that not all 501(c)(3) organizations are classified as public charities? Some are considered private foundations.

Should You Start a Private Foundation?

Your organization will be classified based on the level of public involvement in its activities. Here’s how the IRS defines a private foundation: 

“A private foundation…is typically controlled by members of a family or by a small group of individuals, and derives much of its support from a small number of sources and from investment income. Because they are less open to public scrutiny, private foundations are subject to various operating restrictions and to excise taxes for failure to comply with those restrictions.”

Wondering if your organization is a private foundation? 

“Under the tax law, a section 501(c)(3) organization is presumed to be a private foundation unless it requests, and qualifies for, a ruling or determination as a public charity.” 

Learn more about the lifecycle of a private foundation and exemption

Should You Start a 501(c)(3) Public Charity?

Which organizations are considered to be 501(c)(3) public charities? 

“Organizations that qualify for public charity status include churches, schools, hospitals, medical research organizations, publicly-supported organizations (i.e., organizations that receive a specified portion of their total support from public sources), and certain supporting organizations.”

If your organization is more aligned with those examples, you may want to request a ruling determination to be recognized as a public charity. 

Learn more about the lifecycle of a 501(c)(3) public charity

Conclusion

In conclusion, while you can start a 501(c)(3) organization by yourself, we believe there are too many benefits of hiring an outside expert to tackle these tasks alone. 

If you’re looking to apply for and win a world-changing grant, we’d love to support you. Learn more about the grant proposal writing services we provide at Pearl Solutions. 


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