The range of nonprofit organizations in Nevada is ever growing. It’s no secret that nonprofits are eligible for a federal tax exempt status and this makes forming this type of entity popular with potential business owners. But the increasing popularity has also brought more dishonesty. In the current climate of nonprofits, with news stories of organizational corruption increasing, the Internal Revenue Service began to narrow its focus on the organizations and excess benefit transactions.
Not every violation is made knowingly. It’s easy to miss a filing deadline or struggle with navigating the IRS’s tax exemption process. It’s important for nonprofits and their board to be knowledgeable on the rules and regulations set forth by the IRS and within the organization itself. There are some basic steps you can take to make sure that you’ve given your nonprofit a foundation for success.
If you’re looking to start a nonprofit organization, keep in mind that you exist to promote a charitable or public purpose as opposed to obtaining a private benefit. The corporation’s purposes must meet one or more of the exempt purposes set forth in Section 501(c)(3) of the Internal Revenue Code: “religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.” Make sure to pick your initial directors or trustees ahead of time because you will need to list four board members when you incorporate. If you are seeking the federal tax exempt status, start the process with the IRS soon because it could take around six months to complete. In 2014, the IRS implemented a new form called 1023-EZ which makes it easier for certain organizations to become tax exempt. Only limited types of organizations can use the 1023-EZ form so make sure you go through the form to make sure you are eligible before spending time and money. Lastly, because several people will be involved, it is vital to have properly stated bylaws that are Nevada compliant. Hold a meeting in the early stages, after incorporating, to approve your bylaws.
There are many resources out there that will be able to assist you with the formation of your nonprofit but there is no substitute for formal legal advice. If you are considering forming a nonprofit organization, consider seeking an experienced Nevada formation attorney.