Let’s say the most terrible thing happens. A neighbor’s house burns down, and the family is displaced. Maybe there are medical bills to pay. A caring relative turns to GoFundMe. Before the internet made it so easy to create and fund such an endeavor, people would start a nonprofit or charitable organization.
On the other hand, let’s say a close family member has just been diagnosed with ALS, Lou Gehrig’s disease, or Parkinsons or Alzheimer’s, and you want to support ongoing efforts to find a cure, beyond just your family member or close friend. A nonprofit might be more appropriate. So what is the best option?
In the short-term, a charitable organization can have a personal benefit, but long-term, its founding purpose is not supposed to pay medical bills. That’s what GoFundMe was created for. You do not need (and should not create) a charitable organization if you want a short-term effort, or simply a fundraising vehicle for a single event.
If you have a larger purpose, one that will go beyond a single family or single event, then by all means, create a nonprofit or charitable organization. And of course there are the tax benefits that accrue with a charitable organization.
For IRS purposes, a 501c3 would be tax exempt for these purposes: “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”
Once you have a cause, you will need a name, a copy of your bylaws, an organizing document, and the names of three people for your board of directors. You can easily find templates for these with a quick internet search. Next, head on over to pay.gov and file paperwork. This will be the completion of Form 1023. https://www.irs.gov/forms-pubs/about-form-1023 Just complete the forms and pay your fees. The IRS will then review the application and unless there are questions, an approval with an employee identity number will head your way, best case scenario within a couple of hours. Next, take your federal information and head on over to file your corporation with your state. This is a similar online process that can take only a few minutes.
If even that effort seems too much, then perhaps a GoFundMe is your best bet after all. Today there are tens of thousands of leftover nonprofits that could have been crowdfunding. In fact, there are 1.5 million charities, many of which have been forgotten. Given the broad nature of the IRS language and the rather small set of restrictions, a charitable organization can be created for almost anything anyone could imagine.