5 Benefits of 501c3 Nonprofits

There are a lot of benefits to getting 501c3 tax-exempt status for your nonprofit organization, and understanding them is vital to growing your nonprofit. Read Chisholm Law Firm’s blog to learn more about the benefits of a 501c3 nonprofit.

Benefits of 501c3 Status

Apply for Grants

501c3 nonprofits are often eligible to apply for federal grants, state grants, and private grants from corporations and foundations to help you fulfill your charitable purpose. A grant is money or resources given to an organization to carry out a specific purpose.

For example, a nonprofit that raises health awareness could receive grant funding to host a community health fair from local doctors, hospitals, pharmaceutical companies, etc. These grants would help the nonprofit complete its charitable purpose.

Accept Donations

Nonprofits with 501c3 tax-exempt status can accept donations from individuals and businesses to help accomplish their mission. While you can still fundraise without this status, many people prefer to donate when the organization offers a tax deduction.

For example, a nonprofit formed to educate youth on sports safety would likely attract corporate sponsorships from energy drink companies, sports apparel stores, and athletic trainers. 

These donations could be used to purchase uniforms for the students’ athletic gear, host seminars, hire staff, and open an office. The nonprofit may not be able to complete all these tasks without those donors!

Donations are Tax-Deductible

Donating is beneficial not only to your nonprofit but to donors as well. Donors who give to 501c3 nonprofits can receive a tax write-off for the donations they make. 

To get that deduction, donors must give to qualifying organizations. Qualified organizations include 501c3 nonprofits, religious organizations, veteran’s foundations, nonprofit volunteer fire companies, civil defense organizations, etc.

Purchases are Tax-Free

Qualified 501c3 tax-exempt nonprofits can buy items that help further their charitable purpose without paying sales taxes on those items. Being tax-free means that when you spend money on resources for your nonprofit, your total cost is lowered.

However, you must ensure that your state exempts 501c3 nonprofits from sales taxes since no federal law mandates that exemption. If you are exempt, make sure that you only use that exemption for resources that will help you fulfill your charitable purpose. 

Personal Liability is Limited

Generally speaking, forming a nonprofit can protect its founder, board members, and volunteers from being sued individually in lawsuits as a result of the activities of the nonprofit. Also, you can not be held liable for any debts your nonprofit may incur.

Because nonprofits make so many decisions throughout the year, it’s vital to have personal liability protection. If someone decides to sue your nonprofit, you are less likely to face legal ramifications. Just make sure you have made good faith efforts to further your nonprofit’s mission.

How to Get 501c3 Status

To get 501c3 status for your nonprofit, you need to apply through the IRS. First, you must check if your nonprofit is eligible. Then, you must correctly fill out the paperwork and send it to the government. The IRS has lots of good resources on its website.

Speak with an Expert

When deciding whether or not to pursue 501c3 tax-exempt status, it’s crucial to ensure that you know all the benefits. To better understand what’s best for your nonprofit, you should speak with an expert who can help you get all your ducks in a row.

Chisholm Law Firm has helped thousands of people start and grow nonprofits that impact the world. If you want the best for your nonprofit, look no further than Chisholm Law Firm. Our clients have a 100% success rate for nonprofit and trademark filings*.

You can rest assured that your nonprofit is in the best hands and that we’ll get everything done right the first time. Call us today to schedule your free consultation.

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*Past results do not determine future outcome