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Fundraising Resources is a source of valuable information and free services for non-profit organizations. Read Alon Nager's Article on how to form a non-profit corporation.
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is an award-winning dictionary of Internet terms. It contains thousands of words and definitions that describe the online world of business, technology, and communication. It will help to educate and entertain you about the lingo used in the online world :^)

Forming A Tax-Exempt Nonprofit Corporation

Guest Article By Alon Nager, Legal Counsel for


Starting a nonprofit corporation is not as difficult as you may think. With the right tools, ideas, structure and support, forming a nonprofit should be a piece of cake. That is not to say that the process isn't time consuming. Many hours must be devoted to the process of making your organization official and tax-exempt. Before deciding whether to proceed with the process, you may first want to consider the advantages and disadvantages.

  There are important advantages to forming a nonprofit corporation. First, you are eligible to apply for and receive federal and state tax exemption. These exemptions can save your organization hundreds or thousands of dollars every year. Second, you may apply for and receive many public and private donations which are not available to other types of organizations or individuals. Third, corporate status will protect you and others against personal liability should a lawsuit ensue. Fourth, your organization will possess a separate and perpetual legal existence with formality and structure.

Forming a nonprofit corporation also has its disadvantages. First, there is a lot of paperwork involved in forming the corporation, filing for tax-exemption and keeping in line with annual reporting requirements. Second, the government charges various costs and fees to incorporate and file for tax-exempt status. Third, much time and energy is required to run the business. Fourth, there are various restrictions imposed upon dissolution, namely, you cannot distribute any profit to board members. Fifth, there are restrictions placed on your organization's activities. For example, you can only focus a small amount of your efforts on political activities. Finally, you are always subject to oversight by the Attorney General of state.

When forming a non-profit corporation, there are some extra steps involved. In addition to preparing and filing incorporation documents, paying filing fees and electing board members, you must apply for tax-exempt status with the IRS and your state's taxing body. This issue is discussed in more detail later in the article. For now we should consider the purposes for which you may form a nonprofit.

Nonprofit vs For-Profit

  Nonprofit corporations differ significantly from for-profit corporations in several ways. Nonprofit corporations are formed pursuant to different state law than for-profit corporations. Due to this fact, the requirements for incorporation, day-to-day operations, reporting requirements and handling of finances will all differ. The two types of organization also differ in what they are allowed to try and accomplish.

Unlike for-profit corporations, which are generally formed for "any lawful purpose", nonprofit corporations must be formed to accomplish one or more specific purposes. These purposes typically benefit either the general public, part of the community, or a particular group of members. Typically, a tax-exempt nonprofit group must be formed to pursue educational, charitable, scientific, religious, literary, or cultural goals. Only these groups will gain exemption under section 501(c)(3) of the IRS code.

In other exceptional cases a group can be formed for other purposes yet still be eligible for tax-exempt status. Public schools, libraries, and other government organizations also qualify as public charities, although they usually have not applied for 501(c)(3) status. There are other sections of the code which provide for different exemptions for organizations with different structures and purposes.

Starting Your Nonprofit
Incorporating your nonprofit will be a time consuming and sometimes tedious process, but will be rewarding if you do it right. Use the following information to guide you through the process, making sure that you complete all the steps:


Once you have completed the steps listed above you have successfully incorporated your nonprofit and applied for 501c3 status. In most cases your 501c3 status will be granted so long as you completed the forms correctly and your organization's purpose is indeed a "charitable" one. The process of incorporating can seem tedious, time-consuming and difficult at times, but it is definitely worthwhile in the long run for a successful organization.

Following incorporation there are still many tasks that one must become familiar with, such as filing tax returns, employment taxes, preparing minutes of corporate meetings, handling charitable donations, etc. If you wish to speak with a professional about issues pertaining to the operation of a nonprofit, please apply for our free legal consulting program.

Links to Other Information

Center of Philanthropy and Civil Society
Charity Channel
Internet Non-profit Center
The Grantsmanship Center
Why War?

About is a 501(c)(3) nonprofit organization that provides free services to other nonprofit organizations in the US and Canada, including free web hosting, free web design and free legal consulting. also provides information on various issues to the general public through the use of its 40+ topical sites, directories (see, its blog ( and its discussion forums (

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Read about how Pulver Enterprises hosted a successful Texas Hold'em Tournament to benefit Diabetes causes.

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