Maintain Your Status
Once you’ve been approved at every level, there’s still work to do. Maintaining your nonprofit status is an ongoing process, and the consequences are severe if you don’t follow the rules. Here are 11 things you need to do on an ongoing basis.
1. Make sure your organization operates in the way you said it would in your application.
2. Hold regular meetings of the board of directors, focus on the mission of the organization by being mission driven.
3. Comply with annual IRS requirements to file Form 990 or Form 990-EZ. In these forms, you will report your organization’s activities, governance, revenue, expenses and net assets. Be aware that your completed form will be publicly available. Also, your state government may require a copy.
4. Have diverse funding sources. 501(c)(3) organizations are supposed to be public; if you have too few funding sources, you might have to reorganize as a private foundation. Foundations must operate by a completely different set of rules.
5. Run your organization like a business with its own bank account and credit card. Keep all financial transactions completely separate from your personal accounts.
6. Keep impeccable financial records in case your organization is audited.
7. Do not allow your organization to participate in any political campaigns.
8. Do not unjustly enrich anyone compensated by your organization.
9. Do not use your organization to further non-exempt purposes or to commit illegal acts.
10. Do not allow a substantial part of your organization’s activities to be geared toward influencing legislation.
11. Avoid earning unrelated business income through your organization. This is income from an activity that is regularly carried on and is not substantially related to your organization’s purpose. Such income is subject to the unrelated business income tax.
The Bottom Line
Starting a 501(c)(3) can become a simplified and turn key process with WSG Consulting, Inc. but can be an exhausting process to maintain it. Before you tackle the challenge, weigh the pros and cons of meeting all the legal and tax requirements of forming and operating an official nonprofit organization.
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