Incorporation and Nonprofit Status

Why Form a 501(c) (3) Corporation?

• Limited Liability - when acting as an under-incorporated association or as individuals pursing a common goal, each person may be individually liable if sued by another person or association. By incorporating, limited liability is conferred, and thus, only the assets of the corporation can be reached.
• Tax Deductible Donations - after attaining 501(c)(3) stays, the organization can attract donors that wish their donations to be tax deductible. Under current IRS regulations, donors can deduct up to 50% of their adjusted gross income on their annual tax return.
• Eligibility for Funding - almost all local and state government agencies, and privately operating foundations require funded organizations to have 501(c)(3) status. A routine part of funding applications is a request for as IRS determination letter as proof that the organization has attained 501(c)(3) status.
• Ability to use Public Service Announcements on local radio and television stations.
• Ability to use discounted space from Internet service providers.
• Lower postal rates on third class mailings
• Ability to use interns from local universities.

The main disadvantages to form a 501(c)(3) non-profit corporation are: 1) additional paperwork for maintaining corporate records, tax correspondence, and annual IRS reports, 2) payment of incorporation costs and fee, and 3) the time and energy necessary to maintain the corporation.

Help Guides Available

• Anthony Mancuso, Esq., "How to Form a Nonprofit Corporation in All 50 States: Qualify for Federal 501(c)(3) tax Status," Nolo Press (1993)
• IRS also produces several publications to assist organizations that are seeking to become 501(c)(3) nonprofit corporations. Just call 1-800-TAX-Form. They are Publications 557 and 578.
• The most helpful and easiest to follow instructions can be obtained over the internet through the Community Environmental Legal Defense Fund (CELDF) Thomas Alan Linzey Esq. at www.enviroweb.org/celdf