Filing for 501(c)(3) Status

To get 501(c)(3) status as a non-profit, you will need to file IRS form 1023. I can break the experience down in two comments: (1) time-consuming and (2) expensive.

I can't remember where, but I recall having read that one should expect this to take over 80 hours. From my experience, this is shaping up to be realistic. The form covers many aspects of your non-profit "business" and almost feels like a mini business plan. As mentioned in a previous post, this kind of requirement is beneficial in that it forces you to think about your business. The information in the 501(c)(3) registration also becomes publicly accessible, which means that it can be used to support various efforts towards building your organization. However, it can also feel like a burden, distracting you from your regular efforts. As you start up your non-profit, be sure to plan around the amount of time it will take to complete this. Be sure to start early and make consistent progress because you don't want to miss a big opportunity to further the purpose of your organization just because you didn't get 501(c)(3) status in time. With this information becoming public after filing, you also need to put the right amont of thought and effort into it to ensure that it is of reasonably high quality.

To share an challenge we've faced, we have found that getting our state and local licenses to conduct our activities as a non-profit requires us to file documentation of our 501(c)(3) status. The licensing office also wanted the documentation within a week. Because of this, we had to call the licensing office and ask for an extension so we have time to get our 501(c)(3) status. Fortunately, they were understanding, but this illustrates some of the potential for trouble when the 501(c)(3) status isn't prepared early on.

One thing you might do to make the filling out and filing the 1023 faster is to create a business plan early on. This is something you should do anyways. A non-profit is a type of business, and all business leaders should know and understand their respective businesses to the degree of intimacy required by the process of creating a business plan. While a business plan is not strictly required, and there are businesses that are successful without such documentation, it is a good practice and will almost certainly be worth the effort.

Regarding the costs of filing for 501(c)(3) status, you will need to pay at least $400. You can find the amount applicable to your situation by going over IRS form 8718, which needs to be filed with your 1023. This may not sound like a lot to everyone, but for us it is a good amount. Add to that the expenses of state and local registrations for incorporation, licensing, etc. It probably won't break the bank, but be sure to plan for these costs ahead of time.

In summary, I would strongly encourage you to really think about the kind of organization you need to create to drive your mission. Before jumping into registrations, think about whether they are required and whether the time, money, and effort needed to complete them is worth the benefit they provide. Ask yourself whether those resources would be better spent on activities that further your mission. If you are getting started, we have the following recommendations:

1. As soon as you become serious about your idea, create a business plan
2. Be sure to think about the best way to achieve your vision
3. Carefully plan a timeline for the registrations you'll need along with the resources they'll require
4. If you are going to apply for 501(c)(3) status, take a look at the IRS's step-by-step guide to get an idea of what is required