Should I Start a 501c3? Some Philosophical and Practical Considerations.

One of the most frequent questions we get at MAPS is whether or not an individual should start the 501c3 incorporation process for their project. There are both philosophical and practical answers to that—and you may have different answers for both sides!

On the philosophical side, first make sure your project or organization will truly be viewed as “charitable” activity by the IRS. Who are you serving and what are you providing that they cannot obtain otherwise?

Ask yourself about the lifespan of this project. Do you realistically still see the project happening (perhaps as a full-time job for you) in five years? Ten years? Do you see it growing and becoming something that eventually other people will take over and manage without you? When you incorporate your organization with the federal government, you are creating an organization that will legally exist with or without you.

Do you have a clear mission and specific, measurable goals and outcomes for your organization? Your organization needs direction and purpose to be functional, and clear outcomes to evaluate your impact.

Finally, no one starts a new nonprofit on their own. Legally, you can’t! Do you have at least four other people who will serve as dedicated board members who will contribute their time and skills in management, programming, fundraising, marketing, and other areas of operation?

Click here for more questions to consider before starting and nonprofit, and here for six reasons NOT to start one!

On the practical side, there are a few more things to consider before downloading IRS Form 1023:

Before you even begin the incorporation process, you must have a formal meeting with the initial board of directors, where the slate of officers is installed (i.e., decide who will be President, Vice President, Secretary, and Treasurer.) If you are not clear on those roles, or the format of a board meeting, the accepted guide is Robert’s Rules of Order.

MAPS highly recommends contacting VLAA (Volunteer Lawyers and Accountants for the Arts) to initiate the paperwork process. VLAA will match you with a legal professional to assist with filing your paperwork. Although the Form 1023 itself is not complicated, the many attachments you will need to create and provide (including an operating budget for three years) means that your application will likely be 50 pages or longer. In addition, for most new, small organizations, there is an IRS filing fee of $400.

Although turnaround time has improved dramatically in the past two years, you should expect that after submission, it may take anywhere from two to six months to get your application processed by the IRS. (It took 14 months for MAPS to get our application approved!)

Recently, the IRS has offered a new form called the 1023EZ, which allows for simpler and faster filing (some approvals are happening within weeks, instead of months). However, something to note is that organizations filing via the 1023EZ cannot project to earn more than $50,000 in each of the first three years of operating. While that may seem unlikely in the early stages of your project, if you are planning on paying yourself, other professionals, or undertake any major productions in the next three years, seriously consider how quickly costs can add up, especially if you are presenting multiple shows or events in a single year.  Click here to learn more about the 1023EZ.

An alternative to starting a 501c3 is Fiscal Sponsorship. Click here to learn more about MAPS’ fiscal sponsorship program, or you may wish to research other sponsors to best serve your needs.