19 Jun 2008 by Chetan Shah.

As from my other posts on non profit, you would have noticed that I did the paperwork neccessary for non-profit (501c3) setup with IRS myself. The application was submitted in August ‘07 and was approved in April ‘08.

However, in January ‘08. I received a letter from IRS stating that they had tried to contact me at my mailing address and since I had not responded before the end date mentioned in that letter, they had closed my case. Needless to say that it was a frusterating moment for me because I had never received a letter from the IRS and I was in constant touch with them since December ‘07 and was assured that my application has been assigned and the agent is working on it.

After a couple of phone calls and snail mails my case was reopened and was finally approved in April’ 08.

So, if you get a similar letter from IRS, don’t be disheartened, you will have to just present your case calmly to the assigned agent and s/he will work with you to get it reopened and approved. The IRS agent I was working with was very helpful and guided me thru the whole process.

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25 Apr 2008 by Chetan Shah.

Received the IRS Determination Letter for my non-profit. It took a while but finally got it. I had applied for it in August ‘07. The only question IRS had was for the number of directors (see my other blog entry for this). The whole process was quite smooth. Now that I look back, I am glad that I made the right decision of applying for 501(c)(3) myself rather than giving it to a lawyer to handle it for me. The book which helped me thru this whole process is also mentioned on my earlier blog entry.

Please send me an email (by entering your request in the comment box) if you have any questions regarding the setup process. Now onto the next step, getting my accounting software lined up for the non-profit. As you would have noticed the foundation website is not that appealing, i.e : I have to work on that too.

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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.

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20 Jan 2008 by Chetan Shah.

I recently went through an exercise of setting up a non profit organization . Tax Exempt 501(c)(3) organization from IRS’s perspective.

The process of setting up a Non Profit Organization is pretty complicated. But you don’t need to pay 600 dollars to a lawyer also to do this stuff for you. Overall the steps are as follows :

1. Setup a Corporation in the state where you want to conduct non profit activities. For me it was North Carolina. Basically, submit the articles of incorporation to your state’s Secretary of State. For N.C please visit. They even have a template of Articles of Incorporation for Non Profit Organization.

2. Request EIN number from the IRS. You can do this online here

3. Once the state authorizes your “Articles of Incorporation”, apply for Tax Exempt Status at the State and Federal (IRS) level. The only way I found out that my application was accepted was to search on their website (mentioned above) for my incorporation’s name. They did not send me a letter confirming that my application was accepted. But when I checked their website, I could download a stamped copy of my articles of incorporation (proving that my application was accepted)

3a.
For N.C. state exemption they sent me a form which was very easy to fill.

3b.
However, to get Tax Exemption (501c3) status from IRS is a different ball game. I strongly suggest you to please refer “How to Form a Nonprofit Corporation” book from Nolo (ISBN : 9781413306477)

This book takes you through a step by step process on how to fill Form 1023 (Application for Recognition of Exemption)

Time lines :

Article of Incorporation Acceptance : 4-6 weeks

EIN : Instant

N.C. State Exemption : 4-6 weeks.

Federal : Applied for in August’ 07, received in April’ 08.

Comments, Suggestions, Questions are always welcome

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