Establishing & Maintaining a Non-Profit/501(c)(3) Entity

Establishing a Non-Profit Entity:

  • Determine entity’s structure – Association vs. Corporation
  • Draft, discuss & vote Articles of Organization or Articles of Association and By-Laws
  • File Articles and By-laws with MA Secretary of State
  • Obtain Tax Identification number from IRS
  • Register as 501(c)(3) Tax Exempt Organization by filing Form 1023
  • Register with Attorney General’s office if your PTO will do more than $5,000 in fundraising
  • Register as tax-exempt entity with MA Dept of Revenue (DOR) (Form TA-1)
  • Register for exemption from MA state sales taxes on Form ST-2. (Renewal of tax-exempt purchaser status now occurs automatically as long as the organization is in good standing with MA. The organization will be sent a letter which affirms the renewal for 10 years. Monitor whether you receive your renewal letter and call Mass DOR for a duplicate if needed.)

Maintaining a Non-Profit Entity:

Each Year:

  • File form 990 or 990 EZ, including Schedules A and/or B, with the IRS if your gross receipts are over $25,000
  • File Annual Report Form PC with the Massachusetts Attorney General’s office (requires copy of Form 990, above)
  • Obtain annual Solicitation Certificate from the Attorney General’s office, Division of Public Charities

Ongoing:

  • Federal:
    • Monitor UBTI provisions or file UBTI tax
    • Provide receipts to Donors per IRS regulations
  • State:
    • Monitor status as a “tax-exempt purchaser” and make sure you have a current Form ST-5 to provide to vendors.
    • Apply for permit and pay Lottery tax (with MA Lottery Commission) for certain gaming events, raffles, etc. as needed
  • City:
    • Apply for food permits as required
    • Comply with reporting requirements if contributing money to a ballot question committee

Five Years after filing for 501c3 Status (IMPORTANT!)

  • File Form 8734 with the IRS at the end of your five-year “Advance Ruling Period.” Organizations are given 5 years to demonstrate that they are organized for the public good, but must file this form at the end of that period to avoid being classified as a private foundation and losing 501c3 status.

Corporation vs. Association: Choosing a structure for your entity

  Not-for-profit Corporation

Association

Pro’s
  • limits personal liability of officers and members.
  • incorporation and tax-exemption often increase credibility when
    soliciting contributions.
  • alleviates one filing requirement with MA Sec. of State – but
    see below
Con’s
  • requires filing with MA Sec. of State and one additional annual
    report (to update officers and directors).
  • the individuals of the organization may be liable for the activities
    of the organization, or if a legal claim is brought against an unincorporated
    nonprofit group and there is a legal judgment against the group, the
    personal assets (houses, cars, etc.) of the founders/ members/ officers
    may be used to pay the judgment.