<p>Hi guys,</p>
<p>My friend who does not have a CC account is running into a predicament. She has started her own non profit or charity, BUT does not have it registered with the government. She says it is way to expensive and time consuming to go through the legal process of getting your charity recognized and that it is not worth it, but others have told her that it does not count for anything if she does not go through the process. Are they right? While she founded this charity for her own reasons, she hopes to be recognized by colleges for her efforts. So can a charity or nonprofit only be considered as a charity or nonprofit if it has registered with the government?</p>
<p>withtheflow- I am not an attorney or tax consultant. However, the term 501c3 actually refers to part of the IRS tax code which bascially exempts income (and donations to) from being taxed. So, the purpose for charities to register as 501cs’s is actually to make sure that moneys flowing through their organization are not taxable. [one other little detail…such organizations probably need to be incorporated within a state.]</p>
<p>Your friend should be commended for thinking charitably, BUT there is risk of tax consequences, and presumably other legal problems, in my amateur opinion if she does not set the organization up properly (both taxes and legal organization). I wouldn’t say her efforts “counted for nothing” without such registry, but it is imprudent IMO to think one can incorporate/organize a tax-free entity without any regard to legal hoops & requirements, especially if significant $$ might be going through the non-legal charity.</p>
<p>One suggestion…many communities and states have an association dedicated to servicing and advising non-profits. I suggest you friend find such an organization & give them a call, as they could better advise her on how to achieve her objectives legally.</p>
<p>ps…one other point about 501c3’s…donations are tax deductable to real 501c3’s. That gives an incentive to donators to give, but they usually must have some kind of proof for their own tax records that they were donating to a real 501c3. </p>
<p>[Exemption</a> Requirements - Section 501(c)(3) Organizations](<a href=“http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements---Section-501(c)(3)-Organizations]Exemption”>http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements---Section-501(c)(3)-Organizations)</p>
<p>I also am not an accountant or attorney but have been involved with the process for multiple nonprofits.</p>
<p>We seem to have this issue every year. Students proclaim their readiness to start organizations to do something worthwhile but mostly to impress colleges. Some of us have argued strenuously that the students have no idea of the time, cost, and labor involved.</p>
<p>Those regulations are there to protect the public and discourage folks who want to start a nonprofit for self-profit. Every law doesn’t have great justification, but these do.</p>
<p>Now the good news. Your friend doesn’t need to have an independent organization. She can approach already-existing groups and ask to become a project of one. That would give her an organizational umbrella, as well as insurance, legal and accounting help, etc. Then she just has to follow directions about the administrative stuff and can spend her time actually accomplishing something with her program. When the project is over (or she leaves for college), there’s nothing to maintain.</p>
<p>If she persists with ignoring the laws, she also could qualify for admission to a different kind of selective institution. But does she WANT to learn to make license plates?</p>
<p>As others have stated - it is NOT a charity unless it is registered as such. It is perfectly legal for her to help collect money and items for a cause, but those donations are not deductible to the person giving them, and there may be consequences for her accepting those donations.</p>
<p>She can get “credit” for the work she is doing on her college applications, but she needs to understand that she has not in fact started a charitable organization. Listing what she does as such is no different than claiming the club sport she participates in is a varsity sport. There are college applicants who have in fact gone through the process to start a real charity, and they are entitled to list it as such on their application because they did spend the time crossing their Ts and dotting their Is.</p>
<p>If she did what she did for her own purposes, she can write about it in her essays, and list it under her ECs and community service. Starting a non-profit is only impressive if it’s done for the right reasons. Kids who do so because they see a need in their community are very different from those who actively search for needs to fill.</p>
<p>Just to clarify, she does not collect money, but does do drives to collect equipment and then donates it to her beneficiary (which is usually a local YMCA)… is that still illegal? So she cannot call herself a nonprofit or a charity, more of a community service project? Thanks for all the help guys!</p>
<p>This would be a community service project.</p>
<p>Yes, a community service project. If people want a tax write off for donating that equipment, it needs to be donated directly to the YMCA or other non-profit organization, who can provide a receipt.</p>