Long Island 501(c)(3) Not-for-Profit Formation

What is a nonprofit organization?

Terms: Some confusion exists because of the different names for these organizations: Not-for-profit, non-profit, nonprofit.   These terms are used interchangeably in the charitable world.

Are nonprofits the same as 501(c)(3) organization?

While almost every 501(c)(3) organization is a nonprofit, not every nonprofit has 501(c)(3)status.  A nonprofit organization such as a Lions, Kiwanis or Rotary Club is usually a 501(c)(4) organization operated exclusively for the promotion of social welfare. This means that any donations received by the club are income tax free, but donors cannot deduct their donations on their tax returns.

Why apply for 501(c)(3) status?

Any organization hoping to receive large donations, or to apply for grants should apply for 501(c)(3) status.  Organizations expecting annual donations in excess of $5,000 are required to apply.

Are there any other benefits?

In New York, a 501(c)(3) organization can be exempt for sales tax on purchases, franchise tax and property taxes.  Additionally, special nonprofit bulk rate postage discounts are available for qualifying nonprofit organizations.

Why use a local lawyer?

Online services do not offer personalized mission statements and then charge additional fees for registering with the New York Attorney General, another requirement.  They frequently charge additional fees for applying for separate EIN numbers and for applying for New York sales and franchise tax exemptions.

Even more importantly, establishing a relationship with a New York attorney gives you the ability to ask questions about running the organization.  Some examples of this are whether an organization can use proxies for voting at Board or member meetings, what is a quorum, what are the duties of the Board as opposed to the membership, can voting take place by email.

About Ellen Victor, Esq.

Ellen most recently successfully formed the Merrick Lions Club Foundation, Inc., a 501(c)(3) organization currently fundraising for the Purple Heart Pups.  PHP was established to raise money to help disabled veterans lead successful and independent lives by raising the money needed to provide them with access to service dogs and other supportive programs.