Recommended for Faith-Based Entrepreneurs
When your core purpose is service, advocacy, or community development, the 501(c)(3) is the most appropriate structure.
Key Features
- Exempt from federal income tax on mission-related revenue
- Donor contributions may be tax-deductible
- Eligible for grants, foundation funding, government contracts
- Governed by a board of directors with bylaws and formal accountability
- No individual "owners" — assets must stay dedicated to mission upon dissolution
- Other types: 501(c)(6) trade associations; 501(c)(4) social welfare orgs
Tax Filing
- Form 990 annually — a public transparency document
- Smaller orgs: Form 990-EZ or 990-N (e-postcard)
3 consecutive missed filings = automatic loss of tax-exempt status.
Unrelated business income → Form 990-T (UBIT applies — see Tax Concepts).
Faith-Based Note
- Appropriate when core purpose is service, advocacy, or community development
- Can be legally paired with a for-profit entity when your work spans both charitable and earned-revenue activities — requires careful attorney guidance
Formation Considerations
- IRS Form 1023 filing fee: $275–$600; state incorporation required
- Attorney support typically $1,500–$3,000+; IRS approval takes months
Nonprofit ≠ No Revenue
A nonprofit can generate revenue — it simply cannot distribute profits to owners or shareholders. Revenue must be reinvested into the mission.