Being a 501(c)(3) has the following benefits (copied from the interwebs)
- We won't pay federal corporate income tax except on income derived from unrelated business income. With this exemption, an organization can save 15% - 35% of its taxable income.
- In most instances, we won't pay state corporate income, franchise, excise, use, or sales tax.
- Can offer members, individuals, and corporate donors a tax deduction for their contributions.
- Eligible to receive private foundation grants. Private foundations are required by law to distribute a minimum amount of money for charitable purposes. One way they fulfill this obligation is by making grants to 501(c)(3) public charities.
- Eligible for lower postal rates on third class bulk mailings through the US Postal Service.
These steps are cribbed from an email from Sublesky. Mike also recommended How to Form your Own Nonprofit (This appears to be a brand new edition published June 8, 2009. Talk about hot off the press!).
- Decide who the board of directors is (these are the people who have responsibility for fiscal oversight of the corporation)
- Come up with an appropriate mission statement (you need this for the paperwork to come, plus it's obviously a good idea to get everyone on the same page about what you're trying to do)
- Decide who the officers are (President, VP, Treasurer, Secretary) -- make sure the Treasurer is someone who is good at bookkeeping, can run Quickbooks or the like without screwing things up
- File incorporation papers with the state of Maryland. The application fee is $170.
- Apply for an Employer Identification Number (EIN) so we can open a bank account
- File 501(c)3 application with the IRS (pretty time consuming but worth it). The application fee depends on the anticipated revenue. We are anticipating the fee to be $750.
- In a few months you'll get a letter back from the IRS authorizing you to be a nonprofit for five years
- At the end of five years you have to prove that you are really a charitable organization (they have a few tests they apply to your financial records)