The Internal Revenue Service (IRS) is the Federal agency charged with overseeing nonprofit organizations recognized under Internal Revenue Code 501(a), including 501(c)(3) organizations which are generally referred to as charitable organizations. The IRS has a webpage that it maintains to help you as you work through the details of starting a 501(c)(3) organization.
General Steps to Incorporating your Nonprofit Organization:
This list is NOT comprehensive – but it does provide a general overview and resource links that will aid you in your effort to become a 501(c)(3) charitable organization in Montana.
- Choose a name for the organization.
- Check name availability by visiting the US Department of Patents and Trademarks as well as the Montana Secretary of State’s Office Business Entity Search.
- Create an account and file Articles of Incorporation and a copy of your organization's bylaws with the Montana Secretary of State’s Office.
- Apply for a Federal Tax ID or EIN – here is the IRS link to apply.
- Next, you will want to apply for federal and/or state tax exemptions. If you are eligible to file Form 1023-EZ, register for an account on Pay.gov. Here is additional information on the 1023-EZ.
- If your nonprofit owns property, you can file for property tax exemption in Montana. Form here.
- If your nonprofit will have employees, you’ll need to register for the Montana withholding tax with the Montana Department of Revenue. Find more on how to submit a Montana Department of Revenue Business Registration here.
- You will also want to open a bank account for your nonprofit. To open a bank account for your Montana nonprofit, you will need to bring the following items with you to the bank:
- A copy of your Montana nonprofit articles of incorporation
- A copy of your nonprofit’s bylaws
- Your Montana nonprofit’s EIN
- It is also recommended to file an annual report with the Montana Secretary of State. You may do that here.
Questions to Consider Before Starting a 501 (c) 3:
- Have you asked others to evaluate the idea for your proposed organization?
- Is there a demonstrated need for this service/project that is not being fulfilled elsewhere?
- Is there anyone else that is doing this locally? ...in Montana? …the region? …nationally?
- Have you carefully considered a collaboration or partnership with an existing organization rather than starting a new one?
- Can you articulate your mission in two to three sentences?
- Do you want to be a membership organization or non-member organization?
- What interests or constituencies should be on the Board of Directors?
- Have you developed a two-year draft budget for the organization?
- Will you rely on contributed funds or earned income (program/service fees, etc.)? Both?
- Do you have a plan for financial sustainability?
- Do you and your supporters have the needed skills to start and maintain the new organization?
- Consider taking this nonprofit assessment from Candid to see if starting a nonprofit is the right decision for your idea.
Funding for Nonprofits:
Here are some things to keep in mind regarding funding for nonprofits:
- Sustainable funding is difficult to find - it will take great effort and time to raise funds for your organization every year.
- Some foundations will only fund organizations that already have a track-record spanning several years.
- Grants can be restricted to a narrowly defined purpose and often may not be used to administrative expenses such as rent, utilities, or office supplies.
- IRS Form 990 asks you to report the time and money your organization spent doing fund-raising.
Ongoing requirements for 501(c)(3) nonprofit organizations
Each year you will be required to file a report with the IRS. IRS Form 990 has several different formats depending on several factors including gross receipts. Your organizations Form 990, Form 1023, and all documents accompanying these filings will be open to public inspection. See the IRS FAQ about Public Disclosure requirements.
- Annual Report with MT Secretary of State
- W-3 to State and IRS
- Form IRS 990 – unless your organization is a religious institution (i.e. a church)
- Properly acknowledge donors for receipt of donations according to IRS rules
- Some organizations will need to hire a CPA to perform an annual Audit or Financial Review
- Quarterly Payroll Tax reports - state and federal
- State Work Comp payments
- State Unemployment Insurance payments
These links will help you as you work to start a 501(c)(3) organization.
• Montana Department of Justice Consumer Protection for Nonprofits
• Principles and Practices for Nonprofit Excellence in Montana
• Montana Department of Revenue Tax Exemption Request Form
Nonprofit development and management
• Nonprofit Startup Assessment
• BoardSource e-Book “Starting a Nonprofit Organization”
• The Looking Glass World of Nonprofit Money: Managing in For-Profits’ Shadow Universe
• Accountability Matters
• Starting a Nonprofit Toolkit
• Setting up a Nonprofit Office Toolkit
• Nonprofit Operations Toolkit
• Harbor Compliance Sample Articles of Incorporation
• Harbor Compliance Sample Bylaws
• Fiscal Sponsorship for Nonprofits