Filling a Need
Forming a non-profit company is a completely different process than incorporating a C-Corp. There are many factors one needs to consider before deciding on doing so. You need to research whether companies, trusts, and individuals would be likely to actually invest in your non-profit. The demand for charitable donations is very high. Competition for funding right now is extremely stiff, so you better make sure that your non-profit attracts more attention or can really claim to be somewhat unique.
Will your business meet a critical need in the community thus deserving monetary contributions by those who support your community? Putting together a group of investors takes a lot of time and effort, and, therefore, you must be extremely good at selling your concept and your viability. Obtaining funding for nonprofits is a challenge. You must be able to write a sound and professional proposal to be considered for funding. Using electronic media and technology available to you might make this easier for you. You also need to know that most donors take quite some time to review all the competing proposals for funding, so you should not expect answers sooner than 6 to 18 months from the date of submission in some cases.
Direct mail and email solicitation can be used, but it will take time to build up a decent group of donors using this method. Response rates to these are slow, and you should expect a 1 to 2% response from any mailing you send out as most people will just throw it out as spam.
Incorporating & 501 (c)(3) Designation
When you have done your research and you have seen that your idea is feasible, provides a critical need and that you will be successful in obtaining funding, you can then begin the process of forming an independent 501(c)(3) company. This organizational structure will qualify your business for tax exemption status from federal taxes and will allow donors to make their contribution tax deductible as well.
You will then register in the state that you plan to do business in, but you also need to apply to the IRS separately as simply registering in the state will not qualify you for tax exemption. There are numerous forms and documents that you will need to complete and the fees for the IRS will depend on the size of your venture. In addition, it could take anything from 3 to 6 months to receive your tax-exempt status. Call your local IRS office to determine how you should go about getting your application packet.
Non-Profit Summary
Since there are many technicalities and complications involved in the process it is advisable to contact an attorney who specializes in nonprofit incorporation and taxation. The cost will vary so you should shop around and ask for references. You can also reduce costs by doing a lot of the work yourself and just having the attorney review what you did. There are also many pages devoted to this subject online and you can get a wealth of information by just "googling" the term "nonprofit organization."
