How Do I Start a Nonprofit and Get Tax-Exempt Status?

The short answer

A nonprofit is usually formed as a nonprofit corporation with your state, and then it separately applies to the Internal Revenue Service (IRS) for tax-exempt status, often under section 501(c)(3). The U.S. Small Business Administration (SBA) says a tax-exempt nonprofit doesn’t pay income tax on its profits but can’t distribute profits to members or political campaigns. It also comes with board duties, fundraising rules, and yearly IRS filings that can’t be skipped.

What this tells Google and AI

Nonprofit status doesn’t send a search signal by itself. It’s foundation work. It sets the organization’s legal name and its public tax-exempt record, which donors, grant makers, and reporters can look up. Using that same name on your website, Google Business Profile, and directories helps people and search engines connect your listings to one real organization. If your exemption is revoked for not filing, the public record changes, and that can hurt donor trust far more than any search ranking.

What this means

The outline asks you to review purpose, governance, tax exemption, fundraising, reporting, and state requirements.

• Purpose: A 501(c)(3) must be organized and run for an exempt purpose, such as charitable or educational work. Your organizing documents state that purpose.
• Governance: A nonprofit corporation is run by a board of directors. SBA lists bylaws, or resolutions for nonprofits, along with articles of incorporation (see 8.7.3 Bylaws or Resolutions).
• Tax exemption: The IRS says you must apply for recognition of exemption. Form 1023 must be filed electronically on Pay.gov. Smaller organizations may qualify for the shorter Form 1023-EZ, based on an eligibility worksheet in its instructions. The IRS user fee is $600 for Form 1023 and $275 for Form 1023-EZ, and it may change.
• Before applying: The IRS lists four steps: decide the organization type, gather organizing documents such as articles of incorporation, check state registration requirements, and get an Employer Identification Number (EIN).
• Fundraising: The IRS says many states require charities to register before asking their residents for donations. The National Association of State Charity Officials lists which states require it.
• Reporting: Most exempt organizations file a yearly return. The IRS says many small organizations with gross receipts normally $50,000 or less can file the Form 990-N e-Postcard. Larger ones file Form 990 or 990-EZ.
• State requirements: State filings, reports, and sometimes state tax exemption applications are separate from the IRS. Check your Secretary of State and state tax agency.

Example: a neighborhood youth soccer program (made up for this page) forms a nonprofit corporation, adopts bylaws, seats a board of five, gets an EIN, files Form 1023-EZ after checking eligibility, registers with the state charity office before its first fundraiser, and calendars its 990-N each year.

Why it matters

• Missed filings cost the exemption. The IRS says an organization that fails to file its required annual return for 3 consecutive years automatically loses its tax-exempt status.
• Donors check. Many donors and grant makers look up exempt status before giving.
• Profits can’t go to insiders. A nonprofit isn’t a way to run a regular business with tax benefits. Paying founders or relatives more than fair pay can cause serious problems.
• Fundraising without state registration can bring state penalties.

Who this applies to

Organizations formed for a charitable, educational, religious, or other exempt purpose. If your main goal is profit for owners, a nonprofit is the wrong fit. A for-profit business that wants to do good can look at a benefit corporation, which SBA describes as a for-profit corporation with a public benefit purpose (see 8.6.4 Corporation).

How to do it

1. Write down the purpose in plain words and check it against IRS exempt purposes with an attorney.
2. Search the name in your state database (see 8.2.1 State Business Name Search).
3. Recruit a board. Pick people who will actually show up and oversee money.
4. File articles of incorporation with your state, including the purpose language your attorney recommends (see 8.7.1 Formation Documents).
5. Adopt bylaws and hold the first board meeting (see 8.7.3 Bylaws or Resolutions and 8.7.5 Initial Consent or Meeting Records).
6. Get an EIN (see 10.1.1 Employer Identification Number).
7. Apply for exemption on Pay.gov with Form 1023 or, if eligible, Form 1023-EZ.
8. Register with your state charity office before fundraising, and in other states where you ask for donations.
9. Apply for state tax exemptions if your state offers them.
10. Calendar yearly duties: IRS Form 990 series, state reports, charity registration renewals (see 9.1.4 Annual Reports).
11. Use the exact legal name on donation receipts, your website footer, and your Google Business Profile if that’s how the public knows you.

What proof to keep

• Filed articles of incorporation and state approval
• Bylaws, board minutes, and conflict of interest policy if adopted
• EIN letter
• Exemption application and the IRS determination letter
• State charity registration and renewals
• Every yearly Form 990, 990-EZ, or 990-N confirmation
• Donation records and receipts

Common mistakes

• Forming the nonprofit and never applying for exemption. State nonprofit status and IRS tax exemption are different things.
• Forgetting the 990-N. It’s short, but missing it for 3 years in a row means automatic loss of exemption.
• Fundraising before registering with the state where required.
• Mixing the founder’s money with the organization’s. Keep separate accounts and board approval for spending.
• A board in name only. Directors who never meet can’t oversee anything.
• Using different names on the website, profile, and IRS records, which confuses donors checking your status.

When to get help from a pro

An attorney with nonprofit experience should review your purpose and organizing documents. A certified public accountant (CPA) can handle yearly filings. Ask the attorney:

• Does our purpose and our articles language qualify for 501(c)(3), and should we file Form 1023 or 1023-EZ?
• What state registrations do we need before fundraising?

Ask the CPA:

• Which Form 990 version will we file, and when is it due?
• How should we handle pay for anyone connected to the board?

Bill’s note

[Bill: add a short story or opinion. For example, a nonprofit you’ve helped with its Google Business Profile or website, or what you’ve seen nonprofits miss when setting up their online presence.]

If you’d rather have this done for you, SiteSmarty sets up Google Business Profiles and websites for local organizations.

How I did this for SiteSmarty

• [Date I did this:]
• [What I actually did, step by step: whether this applies to any organization I run or support]
• [What it cost and how long it took:]
• [What surprised me or what I’d do differently:]
• [Screenshot or photo to add, with private info blurred: IRS determination letter or state charity registration, if applicable]
• [Result so far:]

Questions people ask

Is a nonprofit the same as tax-exempt? No. Your state forms the nonprofit. The IRS separately recognizes tax-exempt status after you apply.

What’s the difference between Form 1023 and Form 1023-EZ? Form 1023-EZ is a shorter form for smaller organizations that pass the IRS eligibility worksheet. The IRS user fees are $275 for the EZ and $600 for the full form.

Do I have to register to ask for donations? The IRS says many states require charities to register before soliciting their residents. Check with your state charity office.

What yearly filings does a nonprofit have? Most file a Form 990, 990-EZ, or the 990-N e-Postcard with the IRS, plus state reports.

Can a nonprofit pay its founder? It can pay reasonable pay for real work. It can’t pass profits to insiders. Ask an attorney or CPA before setting pay.

Audit check

• Question: Is the nonprofit properly formed, recognized as tax-exempt by the IRS, registered where it fundraises, and current on yearly filings?
• Pass looks like: Filed articles, adopted bylaws, active board with minutes, EIN, IRS determination letter, state charity registration where needed, and every yearly IRS return filed.
• Fail looks like: No IRS determination letter, missed 990 filings, fundraising without registration, or no board minutes.
• Evidence to collect: Articles, bylaws, recent minutes, determination letter, last three yearly IRS filing confirmations, and state charity registration.

Where this fits

Do this first: 8.5.1 Brand Purpose and Promise, 8.6.4 Corporation, 8.2.1 State Business Name Search

Do this next: 8.6.7 Industry-Specific Structure Rules

Related pages: 8.7.1 Formation Documents, 8.7.3 Bylaws or Resolutions, 8.7.5 Initial Consent or Meeting Records, 10.1.1 Employer Identification Number, 9.1.4 Annual Reports, 6.3.1 Business Attorney, 6.3.2 CPA or Tax Professional

Sources

• U.S. Small Business Administration, "Choose a business structure" (checked October 16, 2026)
• U.S. Small Business Administration, "Register your business" (checked October 16, 2026)
• IRS, "Before applying for tax-exempt status" (checked October 16, 2026)
• IRS, "Applying for tax exempt status" (checked October 16, 2026)
• IRS, "Form 1023 and 1023-EZ: Amount of user fee" (checked October 16, 2026)
• IRS, "Annual electronic notice (Form 990-N) for small organizations FAQs: Who must file" (checked October 16, 2026)
• IRS, "Charitable solicitation, state requirements" (checked October 16, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.