Acully Incorporated

Legal Considerations

Entity Formation

You must form a nonprofit corporation at the state level, typically by filing Articles of Incorporation with specific charitable-purpose language.
Include provisions that comply with IRS requirements, such as a dissolution clause stating assets will be distributed to another 501(c)(3) upon dissolution.

Government Requirements

Must establish a board of directors, adopt bylaws, and hold regular board meetings.
Required to operate for a charitable, educational, religious, or scientific purpose, not for private benefit.

501(c)(3) Status Application

You must request federal tax-exempt status by filing Form 1023 or 1023-EZ with the IRS
If your organization meets the legal requirements for tax exemption, it will be granted 501(c)(3) status

Fundraising

Many states require nonprofit organizations to register with the state if they intend to solicit donations in the state.

Tax Implications

Annual Tax Returns

Nonprofits must file annual returns (Form 990, 990-EZ, or 990-N) depending on their size.
Failure to file for 3 consecutive years leads to automatic revocation of tax-exempt status.

Restrictions on Political Activity

501(c)(3) organizations cannot engage in partisan political campaigns and have limited lobbying capabilities.

Public Support Test

To retain public charity status, a nonprofit must meet certain tests that show broad public financial support.

Unrelated Business Income Tax

If a nonprofit earns income unrelated to its charitable purpose, it may owe taxes on that income and must file Form 990-T.

Payroll and Employment Taxes

If you hire staff, you must withhold and remit federal and state payroll taxes, and file employment tax forms like Form 941.

Record-Keeping and Accounting

Tax-exempt organizations have strict requirements for financial records maintenance and retention. Accurate records and disclosures are crucial for maintaining tax-exempt status.

Roles of an Attorney and a CPA

Non-Profit Solutions