Disadvantages of Receiving 501(c)(3) Charitable Nonprofit Status
Initial and Ongoing Costs
Creating a nonprofit organization takes time, effort, and money. Fees are required to apply for incorporation and tax exemption with state and federal entities, as well as maintaining such status through annual renewals. In some cases, nonprofits may need the services of an attorney, accountant, or other consultant, which will most likely come with additional costs.
Ongoing Paperwork
As an exempt corporation, a nonprofit must keep detailed records and submit annual filings to the state and IRS by stated deadlines in order to keep its active and exempt status.
Shared Control
While individuals who create nonprofits often like to shape and control their creations, personal control of a 501(c)(3) nonprofit is limited. A nonprofit organization is subject to laws and regulations, including its own articles of incorporation and bylaws.
Public Scrutiny
A core function of a charitable nonprofit is to serve the public interest. As such, a nonprofit’s finances are open inspection by the public. The public may request and obtain copies of a nonprofit’s state and federal filings to learn about salaries and other expenditures.