Do I need to become a 501(c)(3) nonprofit?

An initial question for every startup nonprofit is, what is needed to legally become a nonprofit?  Trying to become a 501(c)(3) nonprofit might not be right for every nonprofit, or it might not be right at that particular point in time.  Filing for 501(c)(3) status takes an investment of time, effort and money.  Therefore, a startup nonprofit should consider its activities and strategies before determining whether to merely organize as a state nonprofit corporation or to take the additional step of becoming a 501(c)(3).

A nonprofit corporation is a legal entity organized under and governed by the laws of the state in which it is created.   Creating a nonprofit corporation is typically a simple process that requires a small fee, the appropriate paperwork and an annual filing with your state’s tax office.  The benefits of becoming a nonprofit corporation under the laws of your state are that you create a legal entity that can have its own bank account, own property, and enter into legal agreements.  Moreover, the nonprofit corporation will provide some liability protection to its members.   The ability to perform these administrative tasks simplifies the management of your nonprofit.  The formation of a nonprofit corporation under state law is also a required step before you can file for 501(c)(3) status with the IRS.

Forming a state nonprofit corporation might be adequate for smaller nonprofits that do not plan on significant growth and for who the investment in 501(c)(3) status is not worth the commitment of the nonprofit’s resources.  Creating a nonprofit corporation can be a good initial step for a startup nonprofit as it is attempting to grow before making the investment to become a 501(c)(3) nonprofit.  Ultimately, however, 501(c)(3) status is required for nonprofits to grow and confers many benefits such as the tax deductibility of donations and the ability to apply for a wider range of grants.

This information is meant merely to be informative and does not constitute legal advice.  Please consult with your attorney regarding any of the above-discussed issues.

Additional Resources:

FAQs about Nonprofit Corporations from the Texas Secretary of State: http://www.sos.state.tx.us/corp/nonprofitfaqs.shtml

FAQs from the IRS about 501(c)(3) Status: http://www.irs.gov/charities/charitable/

– by Nick Meyer

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Navigating Austin’s Non-profit Scene—A Newbie’s Perspective

I have to be honest—I am not a native Austinite. I am in fact one of the many recent transplants that have helped to keep Austin at the top of the list of America’s fastest growing cities for the past several years. I moved to Austin last year to continue work in the non-profit sector, work that I began in earnest with AmeriCorps NCCC the year before. I had never been to Austin, and yet I moved across the country sight unseen based on impressions gleaned from friends in the area and promising leads in the non-profit section of Craigslist (and I’ll admit that the “Live Music Capital of the World” label had its appeal). So I may have idealized the city a bit before the move—I can tell you that I don’t spend every night catching the latest music sensation at impromptu gigs in the parking lots of Austin’s downtown. But I can also tell you that the non-profit scene did not disappoint, not in the least.

In fact, I can safely say that Austin is the first city where I have actually felt overwhelmed by the incredible number of options available to professionals in the non-profit arena. Organizations such as Greenlights for Nonprofit Success and TANO provide trainings and professional growth opportunities, Citizen Generation, Austin Involved and I Live Here I Give Here encourage involvement of time and money with a selection of local non-profits…There is even a magazine, Giving City, that is entirely devoted to philanthropy and non-profit activity. Not to mention the hundreds of unique non-profit organizations themselves.

I remember when I felt settled in to my new position with the Giving Program at BuildASign.com, and I decided it was time to actually get out in the community and volunteer. In an effort to encourage such involvement the company provided tickets to employees interested in attending the Greenlights Board Summit, an event featuring fifty-five local non-profits. I left weighed down with brochures and volunteer information from what felt like the majority of the fifty-five, wishing I had more time to devote to preserving the folklife of Austin (Texas Folklife), or supporting individuals who suffer from mental illness (NAMI), or promoting exercise and nutrition in low-income communities (WeViva—the organization I eventually chose to volunteer with, and as an added bonus learned Zumba).

I also left the Summit with an even greater appreciation of the diversity of organizations available in one city, feeling inspired by the genuine support these organizations receive from the Austin community. People often reference the “small town” feel of Austin, and I think it is this kind of involvement that really drives that sentiment home. Local businesses donate proceeds to LIVESTRONG and play host to HAAM (Health Alliance for Austin Musicians) benefits, UT students walk dogs for Austin Pets Alive! or mentor struggling middle school students, and high-ranking professionals already working fifty hours a week join the board of growing non-profits in need of guidance. In Austin, we make time for the people who need us.

There is a reason Austin plays host to so many festivals, summits, and training events—people participate. Taking my current employer, BuildASign.com, as an example: a successful local company provides a Giving Program to help cut costs for non-profits across the country, and has instated employee donation matching programs and paid volunteer hours to encourage community participation. This is the kind of mentality that so much of Austin embraces, and it is something I truly love and value about this city.

Having spent my college years in the rural town of Gambier, Ohio (complete with horse and buggies) you can understand why the Austin non-profit scene may have overwhelmed me at first (and occasionally still does so a year later). In my defense, I have heard even native Austinites complain of the seemingly endless possibilities for community involvement, and of not knowing how to best invest their limited time and energy. Austin is fortunate to be over-flowing with a large population of intelligent, motivated, philanthropic citizens willing to devote time and energy to charitable causes. I have no doubt that Austin Pro Bono will thrive in this city of creative professionals, serving as an invaluable tool to match skill with need and eliminating some of the legwork necessary for finding a good volunteer fit. Personally, I can’t wait to get involved.

– by Brittany Snyder