In Arizona, a non-profit is not necessarily a charity. Often people make the mistake of assuming a non-profit is automatically a charity, which can leave the non-profit organization open to tax liability down the road. A non-profit is an organization is created for some purpose other than making a profit for owners or investors, but not necessarily for a purpose that would qualify it for exemption from taxes. To become a public charity, you must first file as a non-profit organization, but also take the extra step to file for tax exempt status. In order to form a tax-exempt charity, you must file a separate application with the IRS.
This application is known as 501(c)(3), which allows an organization to apply as either a public charity or a private foundation. A public charity is publicly funded by many outside donors, while a private foundation is privately created and funded by private, related sources.
In addition to the IRS form, you also have to file Articles of Incorporation for a tax exempt non-profit, which differ from those of a non-tax exempt non-profit. The Articles of Incorporation must be filed with the Arizona Corporations Commission.
If you are interested in forming a charity, we recommend you sit down with a lawyer and discuss the process to legally forming a tax-exempt, non-profit organization. An attorney at The Carroll Law Firm can go through the steps with you and review the forms necessary to apply for this status.
