As their name suggests, non-profit organizations don't make a profit for those who run the company but serve a certain purpose which a for-profit company could not do. Specific laws apply to non-profit organizations in regard to how they are named and how they collect donations and revenues. Many of these laws vary slightly from state to state.
Articles of Incorporation
Articles of Incorporation are legal documents which state what type of non-profit organization you are starting, your mission, and what you plan to do with income. For example, Habitat for Humanity's mission is to build homes for people who don't have or can't afford them, and it uses the money it raises to build homes. A fee has to be paid to file the articles of incorporation and the Secretary of State's office must approve and sign the document. The exact process of submission and fee amounts vary from state to state.
Obtain Tax Exempt Status
As non-profit organizations do not make any money they are not obligated to pay taxes. Non-profit organizations must apply to the Internal Revenue Service for a tax-exempt status. This entails filling out a number of forms and submitting descriptions of the non-profit organization for the IRS to review. A response can take from three to 12 months; however, IRS approval is required before a non-profit organization can operate.
Additional Documents
Non-profit organizations must complete additional documents as required by the state to maintain their non-profit status. These documents relate to state compliance issues, states which they raise money, annual reporting compliance based on donations and the salaries of the non-profit employees, newly instituted IRS compliance documents and just about all corporate records. All this paperwork is necessary to assure the non-profit is doing what it set out to do, which is to give back to the community.
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