Considering 501(c)(3)? Charity vs. Charitable

501(c)(3): Charity vs. Charitable By The Startup Garage
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If you have decided to incorporate your non-profit as a public benefit corporation with the ultimate goal of obtaining a 501(c)(3) status and federal tax exemption, please consider the following explanation of one of the terms commonly used in the non-profit lexicon.

The requirements for a federal tax exemption for qualifying as a 501(c)(3) organization are contained in 26 U.S.C. §501(c)(3) state:

“Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”

Although the organizations qualifying under 501(c)(3) are commonly called charitable organizations, that term is a bit misleading.  While a charity is designed to provide an act of kindness or other such gift to a person in need, the term “charitable” encompasses actions beyond acts of charity.  The word “charitable” includes every gift for a general public use, for the benefit of an indefinite number of people, and designed to benefit them from an educational, religious, moral, physical or social standpoint.  So DO NOT rule out your eligibility under 501(c)(3) because your non-profit is not a charity – the statute allows a wide range of non-profits to qualify for the federal tax exemption.  Please continue reading with our next blog post entitled Public Benefit Corporations Qualifying Under 501(c)(3): Public Charity vs. Private Foundation.


Whether you have a question about Charity vs. Charitable, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!
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About Tyler Jensen

I work with entrepreneurs who are looking to attract investment and get out of the "Garage". I am passionate about helping entrepreneurs start companies that matter. I helped launch over 100 Companies, Non-Profits and Social Enterprises. I consider myself a serial entrepreneur, startup coach & trusted advisor. * Launching New Companies (For Profit, Non-Profit and Social Enterprise) * Expert Business Plan Writer * Extensive Network of Business Relationships focused on Launch & Rapid Growth of New Companies * Startup, Growth, Marketing, Technology, Web, Business Systems * Trusted Advisor to CEO’s & Entrepreneurs * Capital Raising Strategy Development * Startup Team Development The first company I started and sold is VAVi Sport & Social Club which grew to over 25,000 members in six years, was recognized as San Diego’s 30th fastest growing private company in 2006 by the San Diego Business Journal and 32nd fastest in 2007, and sold for over 25X the capital investment.