The decision to convert from for-profit to nonprofit status involves more than simply filing to become tax-exempt. Becoming a nonprofit organization will first require you to consider whether your current business activities would actually qualify as charitable activities under section 501(c)(3) of the Internal Revenue Code (IRC).
Since you will ultimately need to change your filing status with the IRS, it is important to research their regulations on charitable organizations. Keep in mind that the IRS classifies other types of tax-exempt entities, such as business leagues, labor and social welfare organizations, each with their own restrictions and eligibility requirements.
You will also need to check with your state agency (typically the Secretary of State or Attorney General's office) to find out what required filings you might need to submit. Locate your state's charity office.
Incorporating as a nonprofit involves a certain loss of personal ownership over the organization, since all nonprofit organizations are run by a board of directors. It is important for you to consider the pros and cons of incorporating as a nonprofit before you make your decision.
See our related Knowledge Base articles:
- What are the advantages/disadvantages of becoming a nonprofit organization?
- How can I find board members for my nonprofit?
- How do I write a business plan for a nonprofit organization?
- What is social enterprise?
- Can my organization have a subsidiary?
Topic(s) Starting a Nonprofit
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