Creating a tax-exempt nonprofit organization involves both state incorporation and federal tax-exemption application. Here's the complete process.
Your organization must have a charitable, religious, educational, scientific, or literary purpose as defined by IRS Code Section 501(c)(3). Draft a clear mission statement that aligns with these requirements.
File Articles of Incorporation with your state's Secretary of State. Include required IRS language: the purpose clause, dissolution clause (assets must go to another 501(c)(3)), and prohibition on private benefit. Most states charge $25-$100 for nonprofit incorporation.
Adopt bylaws that establish board structure, officer roles, meeting requirements, and conflict-of-interest policies. Most states require a minimum of 3 board members. Apply for an EIN from the IRS (free, done online).
File IRS Form 1023 (or 1023-EZ for smaller organizations). The filing fee is $600 for Form 1023 or $275 for 1023-EZ. Include your organizing documents, bylaws, financial projections, and a detailed description of planned activities. Processing typically takes 3-6 months.
Apply separately for state income tax exemption and state sales tax exemption. Requirements vary by state. Many states require registration with the Attorney General's office if you plan to solicit charitable contributions.
File Form 990 annually with the IRS. Maintain proper records. Hold regular board meetings. Avoid private inurement (insiders profiting inappropriately). Three consecutive years of failing to file Form 990 results in automatic revocation of tax-exempt status.