The first step is to choose a business name that meets with your state’s requirements. You can check your state’s naming requirements online by going to the state’s filing office website, which is usually the Secretary of State’s office. Next, file the articles of incorporation. Your state should have separate articles of incorporation for nonprofit corporations. You can find the necessary paperwork, which is usually a fill-in-the-blank form, on your state’s website. Before filing your articles, read the IRS tax exemption paperwork thoroughly. The IRS has specific requirements for organizations to qualify for tax exempt status. [2] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Also, their application process requires that your articles of incorporation include specific language. [3] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Familiarize yourself with this language ahead of time and include it in your articles of incorporation.

The EIN is different from your tax exemption number.

The eligibility form asks 26 questions about the size and type of nonprofit corporation you are forming. For example, it asks if you expect your annual gross receipts to exceed $50,000 over the next three years or if they have exceeded that amount in the past three years. The form also asks if your total assets are worth more than $250,000. Other questions have to do with your associations with foreign countries outside the U. S. and your affiliations with other for-profit and nonprofit organizations, such as churches and schools. If you answer “yes” to any of these questions, you must fill out Form 1023. If you answer “no” to all 26 questions, you can use the streamlined Form 1023-EZ. Larger groups must file the IRS Package 1023, Application for Recognition of Exemption. You can find instructions for this form by reading IRS Publication 557, Tax-Exempt Status for Your Organization. Smaller organizations may be able to file Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code online. You will need to include your articles of incorporation with you application for tax exempt status.

The Wallace Foundation provides free templates and tools to help nonprofits build a budget,[8] X Research source project cash flows[9] X Research source and project revenue scenarios[10] X Research source . The Foundation Center offers tutorials on creating a budget. [11] X Research source

Basic checking accounts are for smaller organizations with minimal monthly activity. Commercial checking accounts are for organizations with a high amount of monthly activity. Balances in these accounts earn credit which is used to offset fees. Nonprofit checking with interest accounts allow organizations with varying balances to earn interest.

Remote deposit capture allows you to scan checks and deposit them anywhere you have internet access. Automatic Clearing House (ACH) is a system for tracking and receiving automatic payments. Overnight repurchase accounts automatically invest balances above a certain limit into overnight Government Securities. Fraud controls include positive pay, which protects your from counterfeit and altered checks, and ACH positive pay, which filters or blocks fraudulent ACH transactions.

Option one requires more steps and more research to set up, so it is better for a larger nonprofit that may process hundreds of donations per month. Also, the transactions are transparent, meaning your company name appears on the transaction. Donors see your name on their credit card statements. Smaller nonprofits that don’t want to pay for a merchant account and a payment gateway may opt for option two. When using a third party processor, donors will be redirected away from your site to finish the transaction. For example, if you use PayPal, donors will be redirected to the PayPal site to complete their transaction. Also, the name of your third party payment processor, not your company name, appears on the donor’s credit card statement.

Popular merchant account providers for nonprofits include Dharma Merchant Services, Payline, CDG Commerce and Host Merchant Services. They offer tools to help nonprofits process recurring transactions, donor outreach and event planning. [16] X Research source

Popular payment gateway accounts for nonprofits include authorize. net and PayPal Pro.

PayPal and other providers offer discounts for companies with documented 501(c)(3) status.

Depending on the size of your organization, you can submit either Form 990, Form 990-EZ or 990-N.