A nonprofit organization must be registered at the state, as well as the federal, level. This most often requires separate paperwork to be filed, but is an overall relatively straightforward process.
According to the previously established 5-year plan of the nonprofit organization, any NPO that will make more than 5,000 dollars per year should incorporate. Businesses that make less than this amount may continue as unincorporated foundations, though doing so may mean that they become ineligible for certain (if not most) grant opportunities. Not incorporating can also jeopardize an application to the IRS. NPOs must be recognized as an “organized group” by the Internal Revenue Service in order to be eligible to apply for 501(c)(3) status (IRS-4220 2003).
Even for companies that will not make 5,000 dollars in a given year, NPO activities like charging fees, hiring employees, owning property, and signing contracts are all protected by incorporation. Though it is not easy, incorporating may be the most reliable way to be a recognized, legally protected organization.
