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Five Things You Should Know Before Deciding To Form A Nonprofit Organization and Ministry

Deciding to form a non-profit organization or faith-based ministry is a big step; it involves completing and filing a number of legal documents including Articles of Incorporation. It also requires a real-time/financial commitment. Once the nonprofit corporation is formed and launched, maintaining the new organization requires additional time and energy to make sure it remains in compliance with state and federal laws and regulations.

Before you decide to create your non-profit organization in California, here are five things you should know:

  1. Technically, better described as “not for profit” corporations, these organizations are not organized to make a profit, but rather to accomplish some identified tax-exempt PURPOSE—typically defined as charitable, religious, scientific, literary, or educational. Non-profit organizations are “purpose” driven, not “profit” driven.
  2. 501(c)(3) is the section in the Internal Revenue Service (IRS) code that describes the startup, operational requirements, and compliance regulations for tax-exempt, non-profit organizations, and the rules and regulations that govern them. Because of this, many times tax-exempt organizations are simply referred to as “501(c)(3)s”
  3. Non-profit corporations are not “owned” by an individual or group, but are governed by a Board of Directors, including a minimum of three unrelated officers—president, secretary, and treasurer.
  4. Non-profits generally cannot issue stock or pay dividends under state law. Federal codes also prohibit 501(c)(3), tax-exempt corporations from paying any dividends or “profits” to their members, board members, or any other individuals. This is known as a restriction against “private inurement”, but does not mean that non-profits can’t generate revenue to pay salaries, rent, and other expenses—in fact they can sell products and services related to their tax-exempt purpose, but any “profit” (income less expenses) must remain with the organization and not paid to members, directors, or anyone else.
  5. When a 501(c)(3), non-profit corporation dissolves (closes), any assets remaining after the settlement of any debts, must be distributed to another tax exempt, 501(c)(3)non-profit organization.

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Citadel Ministries: Helping the Helpers

Citadel Ministries, is headquartered in Fresno, California. We are here to help point you toward the resources you need. The staff at Citadel can take you step-by-step through the process of starting a 501(c)(3) nonprofit organization, Christian ministry, or new church plant.

Already have your 501(c)(3) status, but need help with the next steps? Contact us to find out about our donor relations classes, Executive Director training, Board selection, marketing, fundraising, and more.