501c3 vs 501c4: Understanding the Differences

What’s the difference between a 501c3 and a 501 c 4?
Under Internal Revenue Service rules, a 501(c)3 is a non-profit for religious, charitable or educational purposes. Donations to 501(c)3 groups are tax-deductible. A 501(c)4 is a social welfare group and can engage in more advocacy and lobbying.
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Nonprofit groups are essential to society because they support a range of causes and work to enhance people’s lives. But not all nonprofits are created equal, and there are distinct laws and standards that apply to different kinds of NGOs. The two most typical categories of NGOs are 501c3 and 501c4 organizations. But what distinguishes them from one another, and how does one begin one in Wisconsin?

The distinctions between 501c3 and 501c4

Organizations with 501c3 status are tax-exempt nonprofits committed to philanthropic, educational, religious, or scientific goals. Both private persons and businesses may make tax-deductible donations to these organizations. 501c3 organizations are not permitted to support political candidates or lobby on their behalf. However, they are permitted to take part in nonpartisan political activities including issue advocacy and voter registration efforts.

On the other hand, 501c4 organizations are social welfare groups that prioritize advancing the general welfare of the community and the common good. They are permitted to engage in political advocacy and lobbying, but they are not qualified to accept tax-deductible contributions. 501c4 organizations are permitted to advocate for issues and participate in politics, but they are not permitted to endorse political candidates.

Wisconsin 501c3 establishment

Here are the procedures to take if you want to establish a 501c3 organization in Wisconsin:

1. Pick a name for your business and check the Wisconsin Department of Financial Institutions to see if it is already taken.

2. Write the bylaws for your group, which must outline its goals, organizational structure, membership, and governance. 3. Create a board of directors that complies with IRS guidelines, such as having at least three members who are not related to one another. Apply to the IRS for an Employer Identification Number (EIN).

5. Submit the Articles of Incorporation for your company to the Wisconsin Department of Financial Institutions.

6. File Form 1023 with the IRS to request tax-exempt status.

Building a Nonprofit from Scratch

Even though starting a nonprofit without any money can be difficult, it’s not impossible. Reaching out to others who share your enthusiasm for a certain subject and who have similar viewpoints is one approach to get started. Additionally, you might approach charities and charitable groups for grants and donations. You can also plan fundraising activities and campaigns to raise money and support for your cause.

The Three Different Kinds of Nonprofits

Nonprofits can be classified as one of three different categories: 501c3, 501c4, or 501c6 entities. Trade associations that are devoted to advancing the objectives of a certain sector of the economy or profession are known as 501c6 organizations. They are permitted to engage in political advocacy and lobbying, but they are not qualified to accept tax-deductible contributions.

Can a nonprofit’s president also serve as its treasurer?

Generally speaking, there are no legal limitations on a nonprofit’s president concurrently serving as its treasurer. To eliminate any conflicts of interest and to guarantee effective financial monitoring and responsibility, it is generally advised to have different people filling these tasks.

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