A 501(c)(3) organization is an entity which can sufficiently demonstrate that its sole purpose is to carry out a charitable (exempt) purpose, according to the Internal Revenue Service. The entity must follow particular guidelines relating to its organizational structure and operations to meet this standard.
The organizational documents (e.g., articles of incorporation) of an entity seeking 501(c)(3) status must state that its sole purpose is to engage in charitable activities, indicates the IRS. Very often, these activities relate to promoting education, science, religion and the like. Its organizational documents must also indicate that its assets are given over to the entity on a permanent basis, pursuant to carrying out charitable activities. Finally, its organizational documents cannot expressly permit engaging in activities not related to its charitable purpose.
Organizations seeking 501(c)(3) status must follow certain guidelines governing how they must operate, as the IRS describes. Guidelines include ensuring that the organization's earnings do not benefit a particular individual or shareholder. The entity cannot use the organization as a vehicle for operating a for-profit enterprise. The organization cannot participate in political activities, nor can it (in large part) engage in lobbying activities. The organization also cannot function as vehicle intended to benefit a private individual or group.