So you’re starting a nonprofit. That’s awesome! We love people who see a need in the world and decide to make a change. However, when you start your nonprofit, you may question whether or not your organization should become a registered 501(c)3. You may have heard that the process is arduous, or that it can be expensive.
However, it’s incredibly beneficial to become registered as a 501(c)3, and you’ll find that becoming officially registered will result in more opportunities for your organization. Since these organizations are nationally recognized, there is a great degree of credibility associated with them, which can help you draw in more donors.
So what exactly is a 501(c)3?
A 501(c)3 is a registered organization whose primary purpose is charitable, religious, scientific, or educational. 501(c)3 organizations can also address issues regarding public safety testing or the prevention of cruelty to children and animals. The name comes from the section of the tax code that discusses tax-exempt organizations. These organizations are funded by grants and donations, or in some cases, are private foundations.
So what are the benefits?
Tax exemption:
One of the greatest benefits of becoming a registered 501(c)3 is tax exemption status. This means that your organization will be exempt from paying Federal taxes, and in certain states, sales taxes, property taxes, and even payroll taxes. This status will allow more of your funds to flow into your cause, and will also allow you to operate on a smaller budget if necessary. In addition, you’ll also be able to give your donors tax deductions when they contribute, which may encourage them to become recurring givers.
Better System Access
When you’re a registered 501(c)3, you’ll also have greater access to donor management systems and online giving platforms. Many companies offer their client management products at much lower rates (for example, Salesforce offers ten free licenses to registered nonprofits) so you will be able to manage your donors and volunteers through a more powerful system at a lower cost. Additionally, instead of using merchant services that can charge excessive processing fees, you’ll be able to find an online giving platform that’s within your budget.
Other Benefits:
When you become a 501(c)3 organization, you’ll be eligible for local, state, and federal grants. Most organizations require 501(c)3 registration as a prerequisite before applying for a grant, so if you’re registered, you will be able to apply for additional funding. You’ll also have limited liability, which means that your staff will not be personally liable for any debts your nonprofit may incur (except in the case of misconduct). Additionally, 501(c)3 corporations are often eligible for discounts from local providers. For example, USPS offers discounted shipping rates for bulk mailing.
If you’d like to become a 501(c)3, you can contact 501c3.org, or get in touch with our team. We’d be happy to send you more information and let you know the next steps.