Helping you Achieve your Tax Exemption Goals
Whether you’re finally embarking on the goodwill mission or you’re creating a sustainable legacy, starting a non-profit entity offers a lot of benefits. As appealing as the tax exempt status of a 501c3 is, navigating the filing process can be exceptionally challenging. Fortunately, our expertise over the last 20 years has allowed us to help many aspiring for non-profit or tax-exempt legacy status achieve their goals successfully.
Creating a tax-exempt legacy is similar in structure to forming a non-profit, though the initial stages differ slightly. When forming a non-profit there are a variety of considerations that you need to make as far as the orientation of your organization. What is the goal of your non-profit and what service will they be providing? What kind of overhead will be required to start and sustain the operation? How many and what type of personnel will you need for your 501c3? Where will you be headquartered, and where will you provide your services? These are important questions to ask because they determine the scope and feasibility of your operation while streamlining the forms that need to be submitted in order to properly register your non-profit.
A tax-exempt legacy or family foundation operates in a similar way. In summary, a family foundation is a source of revenue for charitable endeavors. A foundation can have a board of directors with complete or partial oversight by heirs of the founder of the legacy that provides guidance and management of the assets. The legacy will be responsible for providing grants to charitable organizations in line with IRS regulations for tax-exempt foundations. In exchange for a modest excise tax, the legacy receives substantial exemptions or reductions in income tax, capital gains tax, estate tax while also providing tax-advantaged growth opportunities.
Based on the state where you will be establishing your non-profit or legacy, there will be certain procedures you will need to follow. Your organization will need to be incorporated, and you will need to register your name. Both non-profits and legacies are recommended to adopt bylaws to dictate the objectives and processes of the organization; non-profits are recommended to also adopt compensation policies relative to employees.
Once you have determined the direction of your entity, created an organizational structure and registered your organization, you need to begin the official filing process in order to gain tax exempt status. The basic form that you will need to submit will be the 1023. Consulting the IRS guide 557 will provide further details on a variety of other considerations regrading the filing status of your entity. For example, you will need to indicate whether your organization is a trust, corporation or association. You may also want to and need to indicate who your donor sources are, in the case of a non-profit, what your power of attorney capacities will be, and whether any transitional documentation is needed until your organization is formed. The filing criteria will also help to determine if your organization requires any separate filing because of its unique classification, such as fore a cooperative service organization or a fraternal organization.
Although more applicable to the non-profit formation pipeline, knowing and understanding what federal grants are available and how to obtain them will help you to leverage any funding that you may need to supplement your operation, whether in its formation or during the course of its existence. Depending on your filing status and the scope of your operation, you may be eligible for one or multiple grants through the federal government. Grants are not as applicable to legacies given the nature of the tax-exempt status, however, depending on the nature of the foundation and its charitable contributions, certain grants may be accessible.
One of the perks of being a non-profit, depending on the size, affiliation and service you provide, are government contracts that are available for your services. Once again, this will depend on your filing status, but the revenue stream from government contracts, and the potential long-term nature of the contracts, can greatly facilitate the funding pipeline of your operation while retaining tax-exempt status. Once again, contracts are not as significant of a consideration when forming a legacy or foundation given that the legacy is effectively its own funding source, rather than providing a service.
These guidelines are just a sample of the many considerations you will be reviewing when forming your 501c3 non-profit or tax-exempt legacy. As experienced consultants in non-profit formation, we realize that this process can be exceptionally overwhelming, especially if you’ve never started a business before. That’s why we try to simplify and guide you through the various steps of the approval process while helping to refine the objectives of your organization. At the outset and along the way, we can help you with developing programs that most suit the service and financial goals of your non-profit entity so that you are maximizing all of the available resources at your disposal. Having clearly refined and comprehensive programs creates a sustainable framework from which you can build and expand your operation in the future.
Another asset that we provide is facilitating community engagement. Fledgling non-profits are as dependent on community resources, such as employees, volunteers, and local legislation as they are on funding. We help to connect you to pre-existing institutions and local services that will help to integrate your organization’s services and make the most of your non-profit’s mission. Doing so helps you to avoid the pitfalls and alienation you might encounter otherwise by trying to emerge into a community that may already have similar services or not have allocated resources to immediately integrate you into the overall non-profit network. Starting a non-profit or legacy is not a consideration for everyone, but is an excellent opportunity for those who are seeking to give back. Beyond the civic benefits, these organizations offer, they also provide a tax-exempt status that can help sustain your financial contributions for generations. If you’re looking to embark on your journey as a non-profit or foundation and are looking for consultants to help guide you along the way, we will gladly support your goal to create a sustainable, meaningful organization