Would an EIN number now affect future non-profit status?
June 6, 2007 2:01 PM Subscribe
Will applying for a Federal EIN number now as an informal organization with no legal status affect a possible non-profit application in the future?
I'm responsible for the finances of a collectively organized educational/infoshop type group that currently exists with no legal status and we'd prefer to keep it that way. To have a bank account to deal with the small contributions that come our way via PayPal, our organization needs a Federal EIN number and I know that loosely affilated groups (such as bowling leagues) readily and easily obtain them.
If we were to some day organize as a non-profit (although we'd probably find a non-profit fiscal sponsor first), would having had applied for the EIN number prior to becoming a non-profit have a negative impact on the application process? I know that this is a legal question (and YANAL) and our recent free-of-charge consultation with a lawyer who advises non-profits did not include this question before we ended our contact (she didn't understand our mission or possibly didn't feel comfortable with our purpose - either way, contacting her again is not an option). I am asking for "real world experience" with this, as I can't find any question like this on the IRS website or on any non-profit advisory site.
A recent conversation with a group similar to ours who is going through the non-profit application process didn't have this specific issue, but they told me about how they had to really be careful about what was on their website and other details of their organization had to be so-so in order not to negatively affect their application process. Hence I don't want to make a "mistake" and have it come back to be an issue later on.
I'm responsible for the finances of a collectively organized educational/infoshop type group that currently exists with no legal status and we'd prefer to keep it that way. To have a bank account to deal with the small contributions that come our way via PayPal, our organization needs a Federal EIN number and I know that loosely affilated groups (such as bowling leagues) readily and easily obtain them.
If we were to some day organize as a non-profit (although we'd probably find a non-profit fiscal sponsor first), would having had applied for the EIN number prior to becoming a non-profit have a negative impact on the application process? I know that this is a legal question (and YANAL) and our recent free-of-charge consultation with a lawyer who advises non-profits did not include this question before we ended our contact (she didn't understand our mission or possibly didn't feel comfortable with our purpose - either way, contacting her again is not an option). I am asking for "real world experience" with this, as I can't find any question like this on the IRS website or on any non-profit advisory site.
A recent conversation with a group similar to ours who is going through the non-profit application process didn't have this specific issue, but they told me about how they had to really be careful about what was on their website and other details of their organization had to be so-so in order not to negatively affect their application process. Hence I don't want to make a "mistake" and have it come back to be an issue later on.
Best answer: Short answer: No.
Long answer: part of the 501c3 application process includes applying for and obtaining an EIN number [see the IRS info on applications for 501c3 status here]
Real world experience answer: I helped start an infoshop too and we're currently in the process of applying for our own 501c3 status after having been umbrellad by an existing org for several years. It's a lot of paperwork and guessing about actual income for us since our infoshop is volunteer run, has no employees no major sources of money. But we'd like to be able to umbrella other emerging non-profits and the like so we're going through the process.
In terms of the application precess and being "careful" if you're operating a political organization, the only requirement the IRS has about that is that you guys don't lobby politicians or sponsor candidates. Ie. it's fine to be political and radical without jeopardizing your potential 501c3 status as long as your organization isn't getting involved in electoral politics, and explicitly advocating illegal activities. Otherwise it's all about the way you word your charitable purposes. For future reference Nolo Press' Non Profit Corporation Handbook is very, very useful.
posted by nerdcore at 3:32 PM on June 6, 2007
Long answer: part of the 501c3 application process includes applying for and obtaining an EIN number [see the IRS info on applications for 501c3 status here]
Real world experience answer: I helped start an infoshop too and we're currently in the process of applying for our own 501c3 status after having been umbrellad by an existing org for several years. It's a lot of paperwork and guessing about actual income for us since our infoshop is volunteer run, has no employees no major sources of money. But we'd like to be able to umbrella other emerging non-profits and the like so we're going through the process.
In terms of the application precess and being "careful" if you're operating a political organization, the only requirement the IRS has about that is that you guys don't lobby politicians or sponsor candidates. Ie. it's fine to be political and radical without jeopardizing your potential 501c3 status as long as your organization isn't getting involved in electoral politics, and explicitly advocating illegal activities. Otherwise it's all about the way you word your charitable purposes. For future reference Nolo Press' Non Profit Corporation Handbook is very, very useful.
posted by nerdcore at 3:32 PM on June 6, 2007
Having an EIN versus not having one really isn't going to make any difference.
However I will say that it is much easier to apply for 501c3 status with a brand-new organization with no history.
The reason is, as part of the application process they want to know the details of your organization's budget and all your activities, including documentation/print-outs of anything like literature you use, web site(s), fund raising materials, and so on.
If you're brand-new and have no history then you get to tell you projected budget and projected activities. Usually that's a lot easier than documenting your actual activities if your organization is complicated at all.
Also there is this consideration: "It is important to file your 1023 within 27 months of the date when your organization was established, or when your Articles of Incorporation were filed. Although the IRS may approve an additional extension under certain circumstances, missing the deadline may result in your charity or foundation not getting 501(c)(3) recognition retroactive to its incorporation date." (See) Since you haven't even incorporated this probably isn't a big deal but just something to keep in consideration in general.
posted by flug at 5:45 PM on June 6, 2007
However I will say that it is much easier to apply for 501c3 status with a brand-new organization with no history.
The reason is, as part of the application process they want to know the details of your organization's budget and all your activities, including documentation/print-outs of anything like literature you use, web site(s), fund raising materials, and so on.
If you're brand-new and have no history then you get to tell you projected budget and projected activities. Usually that's a lot easier than documenting your actual activities if your organization is complicated at all.
Also there is this consideration: "It is important to file your 1023 within 27 months of the date when your organization was established, or when your Articles of Incorporation were filed. Although the IRS may approve an additional extension under certain circumstances, missing the deadline may result in your charity or foundation not getting 501(c)(3) recognition retroactive to its incorporation date." (See) Since you haven't even incorporated this probably isn't a big deal but just something to keep in consideration in general.
posted by flug at 5:45 PM on June 6, 2007
Response by poster: Thanks for these great answers! I feel I'm better prepared to make the decision now.
posted by kuppajava at 3:11 PM on June 8, 2007
posted by kuppajava at 3:11 PM on June 8, 2007
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posted by nax at 2:31 PM on June 6, 2007