Starting A 501c3 Nonprofit Organization (Part 2)
Questions and Answers
- 1.
Which individual must be a resident of the state of incorporation?
- A.
President
- B.
Treasurer
- C.
Registered agent
- D.
Founder
Correct Answer
C. Registered agentExplanation
A registered agent must be a resident of the state of incorporation because their role is to receive legal and official documents on behalf of the company. They act as a point of contact between the company and the state government, ensuring that the company stays compliant with state regulations. Being a resident of the state ensures that the registered agent is easily accessible and can fulfill their duties effectively.Rate this question:
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- 2.
When applying for a 501c3 tax-exempt status, churches need to prepare additional Schedule __ from form 1023.
- A.
Schedule A
- B.
Schedule B
- C.
Schedule C
- D.
Schedule F
Correct Answer
A. Schedule AExplanation
When applying for a 501c3 tax-exempt status, churches need to prepare additional Schedule A from form 1023. Schedule A is used to provide information about the organization's activities, such as its mission statement, programs, and services. It also requires details about the organization's finances, including its sources of income and expenses. This schedule helps the IRS determine if the church meets the requirements for tax-exempt status and if it qualifies for any special considerations or exemptions.Rate this question:
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- 3.
Which of the following activities does NOT qualify for a 501c3 tax-exempt status?
- A.
Serving as a ministry
- B.
Providing humanitarian support in a foreign country
- C.
Organizing workshops and providing educational services to the community
- D.
Providing commercial cleaning services
Correct Answer
D. Providing commercial cleaning servicesExplanation
Providing commercial cleaning services does not qualify for a 501c3 tax-exempt status because it is a for-profit activity. A 501c3 tax-exempt status is granted to organizations that are organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes. While serving as a ministry, providing humanitarian support, and organizing workshops and educational services are all activities that align with these purposes, providing commercial cleaning services is a business activity aimed at making a profit, which does not meet the criteria for tax-exempt status.Rate this question:
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- 4.
Which of the following is unlikely to qualify for 501c3?
- A.
Church
- B.
Private Foundation
- C.
Social Club
- D.
Public Charity
Correct Answer
C. Social ClubExplanation
A social club is unlikely to qualify for 501c3 status because it primarily serves the purpose of providing social and recreational activities for its members, rather than serving a charitable or educational purpose. In order to qualify for 501c3, an organization must be organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes. While churches, private foundations, and public charities can potentially meet these criteria, a social club does not typically meet the necessary requirements.Rate this question:
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- 5.
An organization must state one or more exempt purposes in its organizing document. What exempt purposes does section 501c3 list:
- A.
Charitable, Educational, Scientific, and Religious
- B.
Benevolent, Educational, Religious, and Cultural
- C.
Charitable, Literary, Cultural, and Religious
- D.
None of the above
Correct Answer
A. Charitable, Educational, Scientific, and ReligiousExplanation
Section 501(c)(3) of the Internal Revenue Code lists the exempt purposes for organizations. These purposes include being charitable, educational, scientific, and religious. This means that an organization seeking tax-exempt status under section 501(c)(3) must demonstrate that it falls under one or more of these categories in its organizing document.Rate this question:
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- 6.
Who does an exempt organization must make its exemption application and annual information returns available to?
- A.
IRS
- B.
Grantors
- C.
General public
- D.
None of the above
Correct Answer
C. General publicExplanation
Exempt organizations must make their exemption application and annual information returns available to the general public. This requirement ensures transparency and accountability, allowing anyone to access and review the organization's financial information and activities. By making this information available, the organization demonstrates its commitment to openness and allows stakeholders, including donors, government agencies, and the public, to assess its compliance with tax regulations and the proper use of funds.Rate this question:
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- 7.
The effective date of exemption will be the exact date of incorporation if the organization applies for 501c3 tax-exempt status within ____months of incorporation?
- A.
5 months
- B.
10 months
- C.
25 months
- D.
27 months
Correct Answer
D. 27 monthsExplanation
If an organization applies for 501c3 tax-exempt status within 27 months of incorporation, the effective date of exemption will be the exact date of incorporation. This means that the organization will be considered tax-exempt from the date it was incorporated.Rate this question:
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- 8.
Which is NOT a potential conflict of interest for a board member of a nonprofit?
- A.
Board member selling a building to nonprofit
- B.
Borrowing Funds from nonprofit
- C.
Loaning Funds to nonprofit
- D.
Serving as a volunteer
Correct Answer
D. Serving as a volunteerExplanation
Serving as a volunteer is not a potential conflict of interest for a board member of a nonprofit because it does not involve any financial transactions or personal gain. Board members are often encouraged to actively participate in the organization's activities, and volunteering is a common way for them to contribute their time and skills. This helps them stay connected with the organization's mission and better understand its operations, without any conflict of interest concerns.Rate this question:
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- 9.
The board of directors responsibility is:
- A.
To act on behalf of the organization and its best interests
- B.
Take part in regular meetings of the Board
- C.
Amend the corporation’s articles of incorporation and Bylaws
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The board of directors is responsible for acting on behalf of the organization and its best interests. They are also required to participate in regular board meetings and have the authority to amend the corporation's articles of incorporation and bylaws. Therefore, the correct answer is "All of the above."Rate this question:
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- 10.
501c3 application (form 1023) DOES NOT require the following information on the board of directors?
- A.
Names
- B.
Addresses
- C.
Social security numbers
- D.
Biographies
Correct Answer
C. Social security numbersExplanation
The 501c3 application (form 1023) does not require the board of directors to provide their social security numbers. The application typically requires information such as the names, addresses, and biographies of the board members, but social security numbers are not necessary. This is likely because social security numbers are considered sensitive personal information and may not be required for the purposes of the application process.Rate this question:
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