Nonprofit (501c3).
Mission over profit. Tax-exempt, but heavily regulated.
A 501(c)(3) is a corporation formed under state law and then granted federal tax-exempt status by the IRS. Donations are tax-deductible for the donor. In exchange, you give up personal ownership, accept a board's oversight, and file an annual Form 990 on the public record.
How the IRS sees this entity.
Federal tax-exempt
Federally tax-exempt under IRC §501(c)(3). Donations are deductible to the donor. Unrelated business income may still be taxed.
What you owe, and when.
Forming the entity is the easy part. Here's the recurring paperwork that keeps it alive.
What this trades, and for what.
- Federal tax-exempt on mission-related revenue
- Donors get a tax deduction
- Access to grants, foundations, PRIs
- Perpetual existence
- 3–12 month IRS approval (Form 1023)
- No personal ownership — you can't sell it
- Reasonable-compensation rule limits salaries
- Form 990 is public record
The founders this fits.
- Mission-driven work in education, arts, health, or faith.
- Projects that will live on grants and tax-deductible donations.
- Organisations with a board that can commit time.
Your mission is commercial. Nonprofits can't pay out profit.
Where to actually file.
- Your home state
Nonprofit corporations are state-chartered; form where your programs run.
Related articles.
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