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Non Profit Fundraising Prior to Actual 501c3 Status Granted

Has anyone had experience with fundraising prior to having a 501c3 Status granted by the IRS? I have founded a Non-Profit that qualifies for 501c3 Status, but have stalled due to the filing fees and complexity of the paperwork required by the IRS. Has anyone else started a Non-Profit that has run into this problem? Apparently in Ohio, it is required to Register as a Charitable Organization in order to solicit funds; however in order to complete the Registration I have to provide proof of the Organization's 501c3 Status. Does anyone know of any workarounds for this situation? I have started a gofundme campaign as an Individual that is not affiliated with the Organization in any way other then Founder to try to acquire the funds necessary to have the 501c3 Paperwork sent to the IRS, but I am wondering if anyone knows of any other ways to move past this Catch 22?

8 Replies

Karl Schulmeisters
2
0
Karl Schulmeisters Entrepreneur
CTO ClearRoadmap
Typically you register as a charitable organization in your local incorporation district (I did this for a sports org) - which typically means a board of directors that is not just under your control.

then for donors you tell them upfront that you have applied for 501c3 status and that you expect it to be granted but that for now this is provisional.

And the regs do vary from state to state, in WA you can register as a charitable org without 501c3 status, so you get all the hassles and none of the benefits. Try Delaware
Brion Bonkowski
1
0
Brion Bonkowski Entrepreneur
Entrepreneur - Payments Geek - Humanitarian - @bonkingmad
You are allowed to raise tax deductible funds pending the official status from the IRS. Here is a reference:
http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Contributions-to-Organization-with-IRS-Application-Pending
Another good explanation:
http://grantspace.org/tools/knowledge-base/Funding-Research/Fundraising-Planning/fundraising-during-the-incorporation-process

Hope this helps!
Alexander Timmons
1
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Alexander Timmons Entrepreneur
Founder at Eatify
I am unfamiliar with Ohio laws but hopefully my experience in California will help. In California you can register with the state as a nonprofit corporation for something like $30. This will give you a corporation number that you can reference - it's at least something in the mean time. Applying for 501c3 status isn't overly cumbersome and you are likely to find pro bono law firms that can help you out (we did). When you submit to the IRS, I highly suggest filing for expedited processing as this can cut the standard 18 mo. filing time down to 4-6 months. All donations between the time you get your nonprofit corporation filled with the state and your federal 501c3 status from the IRS are retroactively tax deductible. I.e. You can solicit funds once you get your corporation number and provide that for your donors to use for tax deduction purposes. When you get your 501c3 tax exempt letter from the IRS it will state your corporation filing date at the date you effectively became a tax exempt organization (someone that can solicit funds where the donors can claim those as tax deductions). Also, you're allowed to solicit funds at any time you want... It's just a difference if your donors can write off their donations or not... Crowdfunding vs. Crowdfundraising.. Hope that helps!
Nicci [Nicole] Eisenhauer
1
1
Executive Director & Founder at AIMS - American Initiatives for Military Support, Inc.
The most reliable information I can share is to identify an established non-profit in your local/regional area that has a complementary mission to yours and request 'fiscal sponsorship'. Fiscal sponsorship allows the established non-profit to 'host' your raised funds, usually in return for a percentage of funds raised -- ranging usually between 5 and 10%. An EIN number or corporate ID is not sufficient for tax write-offs without 501c3 tax status.

Alternatively, if you offer a 'significant' benefit to the sponsor, they actually cannot take a write off. So, leverage this by reversing the scenario: offer a truly 'significant' direct benefit directly to the sponsor in the form of advertising or other legitimate service -- that way, the donor can pull their donation from their marketing/advertising or other operating budget category... which the IRS would prefer to see them do, anyway! (Overhead expenses vs. donations are certainly more IRS acceptable.)
Ben Matteo
2
0
Ben Matteo Entrepreneur • Advisor
Co-Founder, CEO Eos Neuroscience
Hi Dwight. This is a common thing. You can have another non-profit with a related / broad enough mission act as a fiscal sponsor. The way it works is that you operate as a sub activity of that nonprofit until you get your own 501c3. They manage the money for you, and you pay them a percentage for the privilege. Donors get the benefits of contributing to a 501c3. Find a nonprofit who has done this before and you should be in good shape. B
Dwight Stickler
0
0
Dwight Stickler Entrepreneur
Sound Design Consultant and Producer at Self Employed
Thanks so much for all your advise and ideas.
Devin Thorpe
0
0
Devin Thorpe Entrepreneur
Journalist | Author | Speaker
Dwight, the IRS allows nonprofits with a 501(c)(3) designation to act as "fiscal sponsor" for an organization that has a 501(c)(3) designation pending. In fact, you don't even need to have an application pending. You just need to be doing charitable things. Most nonprofits won't do this for you, but many organizations known as Community Foundations will. Just look for the local community foundation and you should be set. Many will also help you with the application and administration of your 501(c)(3).
Geoff DePaula
0
0
Geoff DePaula Entrepreneur
I help self-funded companies save 15-50+% on TOTAL yearly health plan costs
Look in to "fiscal sponsorship". Google it.

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