You have homework to do. You'll need to establish
your organization, define your mission, identify core supporters
and more. These steps are essential before you can even begin to
think about fundraising.
In order to be eligible for most funding,
your organization must have its 501(c)(3)
tax-exempt nonprofit status in place. This is usually the minimum
legal requirement for your organization to receive grants.
Some funders will award grants to organizations with pending tax-exempt
status, but most require proof of existing tax-exempt status before
they consider funding an organization.
Without nonprofit status, there are limits to the kinds of organizations
that will donate to you, as well as the amount people will donate
to you. Since your organization is not an official charitable organization,
contributions to your organization are not tax-deductible.
Recognized nonprofit organizations are exempt from income tax, and
most donations to them are tax-deductible. Nonprofit organizations'
purposes fall into one of the following categories:
- charitable
- educational
- scientific
- religious
- literary
- cultural
Public schools, libraries and other government organizations also
qualify as nonprofits, although they usually do not have 501(c)(3)
status, and are therefore ineligible for most private funding. Many
choose to establish an operating foundation to solicit private funds.
A small number of foundations do accept proposals from these governmental
units.
Nonprofit organizations must
- be incorporated as a 501(c)(3) organization
- keep financial records
- have a board
of directors
- have bylaws
- register with the state in which they are organized
There are two parts to incorporating as a
recognized 501(c)(3) organization in Illinois:
You must file for tax-exempt status with the
Internal Revenue Service under Section 501(c)(3) of the tax code.
You can get materials on how to incorporate as a 501(c)(3) organization
at the Donors
Forum Library.
For more information, see the IRS's Tax
Information for Charities and Nonprofits site.
- For a plain-language, easy-to-understand
explaination of seeking 501(c)3 status, download Publication
4420 (pdf, 16 pages).
- For more details on tax-exempt organizations,
download publication
557 (pdf, 63 pages).
NOTE: To open these documents, you need Adobe®
Acrobat® Reader™ software. If you do not have this software, download
it here
at no cost.
Recognized nonprofit organizations are exempt
from income tax. In order to receive tax-exempt status, your organization
needs to provide the IRS with:
- its Employer Identification Number, which you can apply for
at the same time if you don't already have one
- its Articles
of Incorporation (and the Certificate of Incorporation,
if available), Articles of Association, Trust Indenture, Constitution
or other enabling document
- its bylaws,
if they exist
- a full description of its purpose and the activities it expects
to engage in (including standards, criteria, procedures or other
ways it plans to engage in those activities)
- financial data, including statements showing its receipts
and expenditures for the current year and the three preceding
years (if the organization has existed that long; otherwise,
each year of its existence), or a proposed budget if it has
not yet begun operations or has operated for less than one year
Legal publisher Nolo Press has a wealth of information
about nonprofit corporations on its site.
Nolo has also published How
to Form a Nonprofit Corporation
See our complete
list of web resources at the end of this section.
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