Free Nonprofit Starter Kit
The 30-second version
A 501(c)(3) is the federal tax-exempt status the IRS grants to organizations that exist for a charitable, religious, or educational public purpose. It is the most common path for a new nonprofit, and the reason donors can write off their gifts.
The one thing most founders get wrong: becoming a nonprofit at the state level and getting 501(c)(3) status from the IRS are two separate steps. You form a nonprofit corporation with your state first, then apply to the IRS for tax-exempt recognition on top of it.
Why it is worth it
Tax-deductible donations, eligibility for most grants, no federal income tax on mission revenue, and software discounts from the likes of Google and Microsoft. For most nonprofits, fundraising is far harder without it.
Is a 501(c)(3) right for you?
This kit is not here to walk you through filing, it is here to help you figure out whether you are ready, and what you will need. Run yourself through this quick check. Answer each one yes, no, or not sure:
- Your purpose is mainly charitable, educational, or religious: not to benefit you or one specific person.
- The work serves the public, and would outlive your personal involvement.
- You can line up at least three board members, a majority not related to you or paid by the organization.
- You can cover roughly $300–$600 in state and IRS filing fees to get started.
- You are prepared to file a short annual return (Form 990) with the IRS for as long as the nonprofit exists.
How to read your answers
- Mostly yes: a 501(c)(3) is very likely your path. The rest of this kit series helps you pin down the specifics.
- A few “not sure”: completely normal at this stage. Those are the gaps Kits 2 and 3 help close.
- Several “no”: pause before you file. A fiscal sponsor (operating under an existing charity) or simply waiting a season may serve you better.
Not sure a 501(c)(3) is your type?
Most new nonprofits are 501(c)(3) public charities, and that is this kit's focus. But "nonprofit" covers several IRS types, and the right one depends on what your organization is for. Here is how the common types compare.
The short version: only gifts to a 501(c)(3) are tax-deductible as charitable donations. The other types are still nonprofits, but a payment to a 501(c)(4), (c)(5), (c)(6), or (c)(7) is not a deductible charitable gift.
General guidance, not legal or tax advice. Rules and figures can change. Confirm your organization's type and obligations with a qualified attorney or accountant, or directly with the IRS.
| Requirement |
501(c)(3) Public Charity |
501(c)(3) Private Foundation |
501(c)(4) |
501(c)(5) |
501(c)(6) |
501(c)(7) |
| Who it is for | Charitable, religious, educational, or scientific work serving the public | A 501(c)(3) funded by one source, usually a family or company, that mostly makes grants | Social-welfare and advocacy groups, civic leagues | Labor, agricultural, and horticultural groups | Business leagues, trade and professional associations, chambers of commerce | Social and recreational clubs for members |
| Donations deductible to the giver? | Yes, as a charitable gift | Yes, at lower income limits | No | No (member dues may be a business expense) | No (dues may be a business expense to the payer) | No |
| Exemption application form | Form 1023 or 1023-EZ | Form 1023 | Form 1024-A (plus Form 8976 notice) | Form 1024 | Form 1024 | Form 1024 |
| Annual return | Form 990, 990-EZ, or 990-N by size | Form 990-PF every year | Form 990, 990-EZ, or 990-N by size | Form 990, 990-EZ, or 990-N by size | Form 990, 990-EZ, or 990-N by size | Form 990, 990-EZ, or 990-N by size |
| Lobbying | Limited (insubstantial part, or 501(h) election) | Effectively not allowed | Unlimited, can be the main activity | Unlimited, if germane to purpose | Unlimited, if germane to purpose | Limited |
| Political campaign activity | Prohibited | Prohibited | Allowed if not the primary activity | Allowed if not the primary activity | Allowed if not the primary activity | Not its purpose |
| Member-dues treatment | Not a dues model in most cases | Not applicable | If dues fund lobbying or politics, must disclose the nondeductible share or pay a proxy tax | Dues may be a business expense; lobbying-dues disclosure applies | Dues may be a business expense; must disclose the nondeductible lobbying share or pay a proxy tax | Member-funded; dues are personal, not deductible |
Good to know
- Every type needs an EIN, even with no employees.
- 990-series size guide: generally the 990-N e-Postcard when gross receipts are normally $50,000 or less, the 990-EZ when gross receipts are under $200,000 and assets under $500,000, otherwise the full 990. Private foundations always file the 990-PF.
- Only 501(c)(3) public charities use the public-support test, which separates a public charity from a private foundation.
- Charitable-solicitation registration is a state-by-state requirement, mainly for organizations that solicit donations from the public. Check your state.
- Donor deduction limits for 501(c)(3) gifts (commonly up to 60 percent of income for cash to a public charity, lower for a private foundation or for appreciated property) are donor-side rules that can change.
One more distinction inside that private-foundation column: most private foundations are non-operating grant-makers that must pay out roughly 5 percent of their non-charitable-use assets each year, and their donors deduct cash gifts at up to 30 percent of income. A private operating foundation instead runs its own charitable programs (think a foundation-run museum or research institute), meets the section 4942(j)(3) income test plus an assets, endowment, or support test, is not subject to the 5 percent payout excise tax, and lets its donors use the higher public-charity deduction limits (up to 50 percent of income for cash). Both still file Form 990-PF. This is general education, not legal or tax advice.
Want this as a deeper read? See Types of nonprofits: 501(c)(3) vs (c)(4), (c)(5), (c)(6), and (c)(7).
What forming one actually takes
If a 501(c)(3) is right for you, here is what is ahead, so you know what to expect, not so you do it by hand today:
- Articles of Incorporation filed with your state, including the specific IRS purpose and dissolution language.
- Bylaws and a founding board that meets the independence rules.
- An EIN from the IRS (free).
- The IRS application: Form 1023-EZ for most nonprofits, or the full Form 1023.
Each of these has details that are easy to get wrong the first time, which is exactly what the Nonprofit Formation is built to handle.
Ready to actually form your nonprofit?
The Nonprofit Formation generates your state-specific Articles, bylaws, and IRS application drafts step by step, all 50 states. Part of the Formation Suite.
Start the Nonprofit Formation →
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