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ADVANTAGES OF A MONEY SAVING 501(C) Non Profit IRS Classification

ADVANTAGES OF A MONEY SAVING 501(C) Non Profit IRS Classification published on

Having a 501(c), converting an existing corporation to a 501(c), or using a 501(c) organization under the umbrella of your entity can help your business save money, get money, attract people to the corporation and your cause, get discounts on services for the corporation, get access to specialized services for your corporation, and more. And of course, is complete with limited liability protection for your corporation. Having a 501(c) organization, which refers to a tax-exempt nonprofit organization under the Internal Revenue Code section 501(c), comes with many benefits.

Here is an expanded and complete list of the different Money Saving 501(c) nonprofit classifications recognized by the IRS:

501(c)(1): Corporations organized under the Act of Congress (including Federal Credit Unions)

501(c)(2): Title-holding corporations for exempt organizations

501(c)(3): Charitable, religious, educational, scientific, literary, testing for public safety, or prevention of cruelty to children or animal organizations

501(c)(4): Civic leagues, social welfare organizations, and local associations of employees

501(c)(5): Labor, agricultural, or horticultural organizations

501(c)(6): Business leagues, chambers of commerce, real estate boards, etc.

501(c)(7): Social and recreational clubs

501(c)(8): Fraternal beneficiary societies and associations

501(c)(9): Voluntary employees’ beneficiary associations

501(c)(10): Domestic fraternal societies and associations

501(c)(11): Teachers’ retirement fund associations

501(c)(12): Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, etc.

501(c)(13): Cemetery companies501(c)(14): State-chartered credit unions, mutual reserve funds

501(c)(15): Mutual insurance companies or associations for casualty, etc.

501(c)(16): Cooperative organizations to finance crop operations

501(c)(17): Supplemental unemployment benefit trusts

501(c)(18): Employee-funded pension trusts (created before June 25, 1959)

501(c)(19): Post or organization of past or present members of the Armed Forces

501(c)(20): Group legal services plan organizations

501(c)(21): Black lung benefit trusts

501(c)(22): Withdrawal liability payment fund

501(c)(23): Veterans’ organizations (created before 1880)

501(c)(24): Section 4049 ERISA trust organizations

501(c)(25): Title-holding corporations or trusts with multiple parents

501(c)(26): State-sponsored organization providing health coverage for high-risk individuals

501(c)(27): State-sponsored workers’ compensation reinsurance organization

501(c)(28): National Railroad Retirement Investment Trust501(c)(29): Qualified nonprofit health insurance issuers participating in the CO-OP program

501(c)(30): Qualified nonprofit organizations that provide health coverage for patients in certain areas

501(c)(31): Qualified nonprofit organizations operating as Medicare Prescription Drug Card Sponsors

TAX EXEMPT APPLICATION PROCESS AND 501(c)(3) CORPORATE RECORDS COMPLIANCE

To obtain a favorable Federal Income Tax exemption determination from the Internal Revenue Service, your corporation will be subjected to a lengthy (about 6 to 9 months regularly, 2 to 3 months if expedited) and often cumbersome Internal Revenue Service investigation and approval process. During this period, the Internal Revenue Service will review the documents provided, make additional demands, and scrutinize corporate records and detailed information regarding your corporation’s activities. Your Articles of Incorporation, Corporate By-laws, and other corporate documents must include the proper information to comply with Internal Revenue Service Regulations. If you have an existing non-profit corporation that does not meet the requirements of 501(c)(3), it will be necessary to make changes to the Articles of Incorporation and draft the appropriate corporate documents so that your non-profit corporation is in compliance.

LIST OF ADVANTAGES FOR A MONEY SAVING 501(c) ORGANIZATION

1. Tax-exempt status: The primary benefit of being a 501(c) organization is the exemption from federal income tax. This means that the organization’s income, donations, and certain activities are generally not subject to federal income tax, allowing more resources to go toward the organization’s mission.
2. Deductible donations: Donors to 501(c) organizations can generally deduct their contributions from their taxable income, incentivizing individuals and businesses to support charitable causes. This can help attract more donations and support for the organization.
3. Eligibility for grants and funding: Many foundations, government agencies, and other grant-making organizations provide funding exclusively to tax-exempt 501(c) organizations. Having 501(c) status can enhance an organization’s eligibility for grants and increase opportunities to secure funding for projects and programs.
4. Credibility and trust: Being a recognized tax-exempt organization lends credibility and trustworthiness to the organization. Potential donors, supporters, and stakeholders often view 501(c) status as a mark of legitimacy, which can boost confidence in the organization’s mission and activities.
5. Eligibility for certain exemptions and discounts: 501(c) organizations may be eligible for various exemptions and discounts, such as property tax exemptions, reduced postal rates for mailings, and discounts on certain goods and services.
6. Access to certain resources and services: Nonprofits with 501(c) status may have access to specialized resources and services, such as discounted software, volunteer support networks, capacity-building programs, and training opportunities offered by nonprofit associations or foundations.
7. Limited liability protection: Forming a nonprofit corporation under 501(c) status can provide limited liability protection to the organization’s officers, directors, and members, shielding them from personal liability for the organization’s debts and obligations in most cases.

It’s important to note that specific benefits and requirements may vary depending on the particular 501(c) classification and applicable state laws. Consulting with legal and tax professionals or nonprofit experts is advisable to fully understand the benefits and obligations associated with obtaining and maintaining 501(c) status.

For example, a 501(c)(3) organization is a non-profit corporation formed to carry out a charitable, religious, literary, educational, or scientific purpose that is recognized by the Internal Revenue Service as tax-exempt. Such a 501(c)(3) non-profit corporation doesn’t pay federal or state corporate income tax on profits it makes from events carried out in furtherance of its exempt function. In essence, this is because both state and federal taxing authorities believe that the benefits the public receives from these organizations entitle them to this advantageous tax-exempt status. These corporations are known as 501(c)(3) non-profit corporations because they are granted tax-exempt status from Section 501(c)(3) of the Internal Revenue Code.

Non Profit Organizations; How to Create One

Non Profit Organizations; How to Create One published on

Developing a non profit organization is not as non profitable as it may seem. Non profit organizations have to produce enough money to pay for its employees as well. In this article, we are going to discuss the development of a non profit with regards to the benefit of being a recognized 501 c3 organization and receiving donations. We will also discuss the difference between an LLC vs an LLP, protecting your trademark, and adding entities to your business such as fictitious names or assumed names.

Non Profit Organizations

How to Develop Your Non Profit Organization

You have sat on the park bench thinking how much good you can do by creating a non-profit organization to help the children you know with autism. Your son was diagnosed with autism when he was 6 years old.  Your child will need more work than the average child. If something isn’t done soon, your child may get left behind.

When speaking to the school, they have told you repeatedly that there are just not enough funds in their district to slow the classes down for him.  This is when you develop your non profit organization. It’s not much; just a part-time organization that teaches the children life skills so that they are capable of surviving if you, the parent/guardian, are not around.

What is the process to structure your non profit organization?

First, you need to register the business as a non profit organization.  Once you have received your articles of incorporation, it is important that you apply with the Internal Revenue Service as soon as possible for your tax-exempt status. You may ask, why so fast? This is because the questioning of the tax-exempt application is long and tedious. The quicker you get to the questions from the start of your business, the less explanation you will have to give for each. Limited information is available for each question.

Now that you have your 501 c3 tax-exempt status, what benefits do you have?

Depending on the business, and location, you may be eligible for sales tax exemption. You may have eligibility to receive grants or loans for your organization to hire specialists or equipment for your kids. You may receive public recognition for your business being a non profit organization. Government organizations may offer you discounts such as the post office.

Is it possible to make money while running  a non-profit organizations?

A non profit organization is a business.  It carries out charity work and raise money to help the community.  Because of this, resources are needed to carry out their work.  You will need to hire lepers, specialist and a management team.  Your business is going to require that you put the majority of your time into it and you will need to receive a paycheck too.   For your business model, you need to consider how money is going to be received  and plan accordingly.

Should I protect my non profit registered trademark?

All of the city knows about your program and it has grown bigger than ever expected. Donations have poured in, and you want to create a trademark for your organization’s  name and logo.

 

What is a trademark and how does it work?

A Federal Trademark is a word, name, symbol, phrase, slogan, or combination of these items which is used to mark and distinguish goods or services to indicate their source or origin throughout the United States. Federal Trademark rights may be used to prevent others from using the same or a similar Mark in the United States.

• A name or logo in many cases overtime becomes a company’s most valuable asset.
• It prevents others from adopting your name or design and gives you very favorable enforcement powers throughout the United States.
•  You will recieve no or only limited protection in a local geographic region.
• It Allows you to put everyone on notice with the Federal Trademark symbol “®” once the Federal Trademark process is complete.
• The business may advertise and promote your mark and build name recognition and goodwill for your business with out fear of losing the Mark to another.
• The Federal Trademark or Federal Service mark may subject the copycat to injunction, statutory treble damages, profit disgorgement and attorney’s fees if litigation is necessary to prevent such a copycat from using your Mark.

We can help you register your trademark at www.AmeriLawyer.com

Which is better for my new company; Limited Liability Partnership (LLP) or Limited Liability Company (LLC)?

Non Profit
Marys Salon and Spa

You have spoken to a local barber to assist your children with their daily grooming routine. Joe and his wife Mary, have showed great interest in joining your group. Joe would like to help with the boys. Mary would like to make a salon/ spa for the girls. Which type of entity should they create; an LLP or and LLC?

Limited Liability Partnership (LLP)

A strong feature of the Limited Liability Partnership is that obligations of the limited liability partnership, whether arising in contract, tort, or otherwise, are solely partnership obligations so that none of the partners are personally liable. The only reason for the use of the mere limited partnership form, rather than limited liability partnership, is when a limited partnership is required by lenders or other creditors. Understandably, because of liability protection, the limited liability partnership form of partnership is preferred over the other types of limited partnerships.

Limited Liability Company (LLC)

The main advantage of the LLC is that it is not burdened with the ownership restrictions imposed on a small business corporation (also known as a Sub Chapter S Corporation). An LLC may have more than 100 Members or as few as one. Its interests are held by corporations, partnerships, Non-Resident Aliens, trusts, pension plans and charitable organizations; the LLC may make special allocations, thereby avoiding the single class of stock requirement applicable to an S corporation; and it may own more than 80% of the stock of a corporation and, therefore, may be a member of an affiliated group.

How do we decide which is better for us?

Joe and Mary may also want to test the waters before forming one of these entities. They can form a contract between each other to agree on all the aspects of the business. They may also want to create a primary business for Joe, and then create a fictitious name for Mary’s salon. This contract needs to establish who is responsible for the liability of Mary’s salon and spa.  If she takes a loan to create this Eden for the girls and cannot pay the costs of the loan, who would be the person liable? If the salon fails any unpaid items, could affect Joe’s barbershop.

Spiegel and Utrera can help you decide the best entity for your business.

You can hear more details about starting a non-profit organization and much more by visiting our YouTube channel.

 

Final Thought:

It is in an entrepreneurs best interest to go to the local library, and look in trade association journals.  These journals can assist you with developing your business plan, or expand your business.

ARE YOU READY TO START YOUR BUSINESS?
INCORPORATE TODAY AT WWW.AMERILAWYER.COM

Not Ready? Have More Questions?
If you are a member of Spiegel & Utrera, P.A.’s General Counsel Club and have business related questions, call (800) 734-9900 or ClubAssist@AmeriLawyer.com for assistance. As a member of the  General Counsel Club, you receive unlimited legal, business, credit and tax advice all year long.

Spiegel & Utrera, P.A. is a corporate law firm with its main offices located in Miami, Florida with offices throughout the United States. As a law firm, we do more than just help you form your business entity. We stand ready to help with the maintenance of your legal business entity! We will assist you with Incorporation Service, Trademarks, Copyrights, Estate Planning, Legal Counsel, Wills,Trusts, Agreements & Leases, Corporate & Company

Non Profit Organizations and 501 C3 Exemption

Non Profit Organizations and 501 C3 Exemption published on

Non Profit  and 501 C 3 FAQs

Lets talk about Non Profit  and 501 C3 organizations and where to start them for a minute.  We are going to answer the following questions:

  1. Is there a difference between a non profit and 501 C3?
  2. What is the process to set up a non profit organization?
  3. How many people do you need to set up a non profit organization?
  4. Can I purchase property and not affect my tax exempt status?
  5. Where should I Start my business? Can I set up my business in any state; or does it have to be in the state I live in?
  6. What will happen if I don’t have a separate bank account for the business? Can they go after my personal money?

1. What is the Difference Between a Non Profit and a Tax Exempt 501 C3?

When we refer to a non profit organization, we are referring to any organization formed and organized for an non profit purpose. A 501 (c) (3) is a recognition by the IRS that the organization is now exempt from all income taxes. Tax exempt however, is merely the result of the non-profit being recognized. Most tax exempt companies are non-profit organizations set up for charity, religious, literary, or educational purposes.

  • A non profit corporation is a business entity incorporated at the state level where there are no equity owners that hold shares of stock. Also, none of the corporate income is distributive to members, directors, or officers. Instead, such non-profit corporations typically are controlled by members that elect a board of directors.
  • Tax exempt 501(c)(3) non-profit corporations are classified as either a public charity or a private foundation. Generally, organizations that are classified as public charities are those that are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities; have an active program of fundraising and receive contributions from many sources, including the general public, governmental agencies, corporations, private foundations or other public charities; receive income from the conduct of activities in furtherance of the organization’s exempt purposes; or actively function in a supporting relationship to one or more existing public charities.
    Private foundations, in contrast, typically have a single major source of funding (usually gifts from one family or corporation rather than funding from many sources) and most have as their primary activity the making of grants to other charitable organizations and to individuals, rather than the direct operation of charitable programs.

Back To List of Questions

2. What is the process to start a non profit company?

  •  First thing is that you would need to file with the state and organize your business so that you can receive your articles of incorporation.
  • As soon as you receive the articles of incorporation, register the company with the IRS.  This is so that you will be recognized as a tax exempt organization.
  • Its important to file the articles with the IRS as soon as possible because you will need to answer many questions about your organization.  If you complete the questions early, you would have to answer less questions regarding your business, because there is less information to process.  The longer you wait, the more questions you will have to endure which can make the process a longer one.
  • You should then receive a letter of determination from the IRS with in two to six months, and  your business should be ready to go.

If you’re not sure about what to do or seem to have a hard time with the process and you are ready to start, we can help you create your non-profit organization.
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3. Do I need a specific amount of people to create my non profit organization?

Because a non-profit organization, a total of 3 people must direct the entity.  You have been given the power of a tax free business.  The benevolent purpose must be carried out by all three members of the company.  A non-profit organization retains all money from the business.  But don’t forget, that you still have administrative expenses and salary.

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4. Can I purchase property with out affecting my tax exempt status?

It is time to purchase a secondary building for the business. Can you purchase a new building without it affecting your tax exempt status? The answer is yes.  It is advisable however, to create a multi member LLC for the corporation.  You could purchase the building through the multi member LLC, and lease the building to the non-profit organization.

This way there are many advantages to both entities.  The multi member LLC would receive an income.   The depreciation of the building with off set the rent income.  Leasing the building to the non profit organization could result in the appreciation of the building which will be to the advantage of the LLC in the years to come.  It is important to discuss that the lease must adhear to a few rules.  The lease must be at fair market value as indicated by an appraisal, and it must be an at arms length transaction with full disclosure.

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non profit
Non Profit Organization

 

___________________ Additional FAQs_______________________

5. Where should I start my business; does it have to be formed in the state where I live?  Can I choose which state I set it up in?

When considering where to set up a business, you must entertain all ideas about laws and regulations of businesses. Yes you can set up a business anywhere. There is however, a way to go about it.  Many times the it may be that the business owner would want to open the business in another state.  Nevada, for example, offers asset protection.  Because there are so many choices, you may want to speak to a legal representative to decide which of the many options are right for you.  Perhaps, an entrepreneur would set up his business in Delaware because of it anonymity and it background history of business law.  Most new business owner do not mind paying the cost to be qualified.  With the costs, state offers them asset protection.

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6. What will happen if I don’t keep my business expenses and personal expenses separate?

When you open your new business, you should immediately open your new bank account under the business name.  It is also important to make sure that you keep records on your business expense.  The problem many new entrepreneurs have is where do I get the money to finance my brand new business?  You can loan money to your business and pay yourself back. Another option is to invest in your business.  By placing your company’s money in an account, you are also creating a protection against any type of liability that may come up.

Back To List of Questions

Final Thought: Procrastination is the number one enemy of the entrepreneur.

ARE YOU READY TO START YOUR BUSINESS?

INCORPORATE TODAY AT WWW.AMERILAWYER.COM

Not Ready? Have More Questions?
If you are a member of Spiegel & Utrera, P.A.’s General Counsel Club and have business related questions, call (800) 734-9900 or ClubAssist@AmeriLawyer.com for assistance. Remember, as a member of the  General Counsel Club, you receive unlimited legal, business, credit and tax advice all year long.

Spiegel & Utrera, P.A. is a corporate law firm with its main offices located in Miami, Florida with offices throughout the United States. As a law firm, we do more than just help you form your business entity. We stand ready to help with the maintenance of your legal business entity! We will assist you with Incorporation Service, Trademarks, Copyrights, Estate Planning, Legal Counsel, Wills,Trusts, Agreements & Leases, Corporate & Company

Registration Requirements Before Charitable Solicitation

Registration Requirements Before Charitable Solicitation published on

Any non-profit that makes, or intends to make a charitable solicitation must register with the State

Charitable solicitations include statement in which appeals for charitable purpose, the name of the organization is used, or implies that the contribution will be applied to a charitable purpose. The registration requirement is triggered when your organization asks for a donation, not necessarily when the organization receives a donation. After receiving the donation additional requirements present themselves at the federal level. The IRS requires charitable organizations to file an Annual Report (Form 990 or Form 990 EZ). On this report you will have to answer questions about your organization’s fundraising activities and registrations.

Exemptions from Registration Requirements

Some non-profits are exempt from registration because they are already highly regulated by other agencies; for example, non-profit hospitals and education institutions. Religious organizations may be exempt in some cases because states don’t want to interfere with the free exercise of religion. Also, some non-profits may not receive enough donations to qualify for registration. Nevertheless, determining whether your non-profit is exempt can be difficult. If your non-profit receives contributions under $25,000 per year, then it is exempt in New York but not California. Therefore, if you plan on fundraising out of state, you will need to take a close examination of each state’s law.

If you are a member of Spiegel & Utrera, P.A.’s General Counsel Club and have business related questions, call (800) 734-9900 or clubassist@amerilawyer.com for assistance. Remember, as a member of the  General Counsel Club, you receive unlimited legal, business, credit and tax advice all year long.

Spiegel & Utrera, P.A. is a corporate law firm with its main offices located in Miami, Florida with offices throughout the United States. As a law firm, we do more than just help you form your business entity. We stand ready to help with the maintenance of your legal business entity! We will assist you with Incorporation Service, Trademarks, Copyrights, Estate Planning, Legal Counsel, Wills,Trusts, Agreements & Leases, Corporate & Company

Mergers Of Nonprofit Organizations

Mergers Of Nonprofit Organizations published on

Nonprofit organizations can fully and completely integrate their programs, functions, and membership by merging or consolidating. On occasion, two nonprofit organizations will want to combine their functions to expand their outreach to the individuals or groups they serve. A merger involves one of the organizations dissolving and the other organization taking over the assets and responsibilities while a consolidation involves both organizations dissolving and creating and entirely new nonprofit organization. The decision to merge or consolidate is based on legal, tax, or economic concerns, and usually it is a combination of all these factors.

The law imposes strict fiduciary responsibilities on members of an organization’s governing body to ensure that it is in the best interests of the organization. Directors and officers may be held personally liable if they fail to act prudently and with due diligence. It is also important to remember that when merging organizations are tax-exempt under different classifications, the resulting merged entity will generally need to file a new application for federal tax exemption with the IRS.

Mergers and consolidations of nonprofit organizations are complex processes that require the approval of the boards of directors and membership of each organization, and a plan of merger or consolidation must be presented to each organization and its members. In addition, federal antitrust laws prohibit mergers or consolidations that may substantially lessen competition in any line of commerce – including nonprofit organizations. An organization should have legal counsel review the impact of a proposed merger or consolidation due to the complex issues that may arise.

If you are a member of Spiegel & Utrera, P.A.’s General Counsel Club and have business related questions, call (800) 734-9900 or clubassist@amerilawyer.com for assistance. Remember, as a General Counsel Club member, you receive unlimited legal, business, credit and tax advice all year long.

Spiegel & Utrera, P.A. is a corporate law firm with its main offices located in Miami, Florida with offices throughout the United States. As a law firm, we do more than just help you form your business entity. We stand ready to help with the maintenance of your legal business entity! We will assist you with Incorporation Service, Trademarks, Copyrights, Estate Planning, Legal Counsel, Wills,Trusts, Agreements & Leases, Corporate & Company

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