Tip for 501(c)(3) Non Profit Organization Setup

15 Apr 2008 by Chetan Shah.

One of the factors for which IRS got back to me was the number of directors for my non profit organization. Although states allow a non profit organization to have 1 director, IRS prefers to have more than 1 (cannot tell you the exact number they want). During my initial filing I had named myself as the director of the organization and the agent handling my case asked me to add more directors to my organization, which was perfectly acceptable to me.

The reason I want to highlight this observation is because once IRS requests for more information, it puts your case at the very bottom of the cases. It keeps the case on hold as it is waiting for you to reply. The date they receive your reply is considered as new date of your application and it will be reviewed in the order it was received. It may take approximately 3-4 months before you hear back from them. Hence, it is in your best interest to name more than 1 director on your 501(c)(3) application.

The points (should be indicated in your bylaws) to note when naming directors are :

- Quorum Criteria
- Voting Majority Criteria
- Compensation of Directors
- Duration of their engagement with the organization.

In my case, I name 4 directors with at least 3 needed for Quorum and decision making is via majority of vote criteria. My organization does not pay any compensation to its directors and duration of engagement is 3 years.

Posted in Foundation | No Comments »