Nonprofit Corporation
Forming a nonprofit and applying for tax-exempt status
Starting a nonprofit involves two separate processes that people often confuse. First you incorporate a nonprofit corporation with a state. Then, if you want federal tax exemption, you apply to the IRS. This course covers both, in order.
Quick answers
Is a nonprofit automatically tax exempt?
No. Incorporating as a nonprofit under state law does not grant federal tax exemption. Exemption is a separate IRS application, usually Form 1023 or Form 1023-EZ.
How many directors do I need?
State minimums vary, and some allow a single director. The IRS looks for an independent board, so most organisations seeking exemption appoint at least three unrelated directors.
Can founders be paid?
Yes, reasonable compensation for actual work is allowed. What is not allowed is private benefit or earnings passing to insiders beyond fair pay.
How long does exemption take?
Form 1023-EZ decisions are typically much faster than full Form 1023 reviews, which can take several months. Check current IRS processing information before promising donors a date.
Course lessons
- 1What is a nonprofit corporation?A corporation with no owners, formed for a purpose rather than for profit.
- 2Nonprofit vs tax exemptTwo separate steps, two separate authorities.
- 3Charitable purposes and eligibilityWhat the IRS accepts as an exempt purpose.
- 4Choosing a state and a nameWhere to incorporate and what the name must satisfy.
- 5Nonprofit articles of incorporationThe clauses that make later IRS approval possible.
- 6Board of directors and governanceWho governs the organisation and how independence is judged.
- 7Bylaws and conflict of interest policyThe internal rules the IRS expects to see.
- 8EIN and nonprofit bankingGetting the tax number and the account open.
- 9Applying for federal tax exemptionForm 1023 and Form 1023-EZ, and which one applies.
- 10State charitable registration and exemptionsFundraising registration and state-level tax relief.
- 11Ongoing nonprofit complianceAnnual filings and the habits that keep exemption safe.
Want help with the paperwork?
You can incorporate and apply for exemption yourself using the steps in this course. If you would rather have support, Gullia Filing prepares and files your nonprofit incorporation, supplies compliant bylaws and conflict of interest policy, and obtains your EIN.
Official sources
Last reviewed: September 2026