Lesson Overview

Once you’ve built a small group of dedicated wrestlers, it’s natural to start thinking about raising money or accepting registrations to sustain and grow your club. Most youth sports teams operate as 501(c)(3) nonprofit organizations because it allows them to accept tax-deductible donations, apply for grants, and serve the community with greater legitimacy.

Tips

Forming a 501(c)(3) Non-Profit.

If your goal is to build a program that serves the community and reinvests all resources back into the athletes, then forming a nonprofit is likely the right path. However, the process involves legal, financial, and administrative steps that can be daunting and are often underestimated by passionate coaches eager to make an impact.

This guide outlines the key steps to forming a 501(c)(3) nonprofit and obtaining a Federal Employer Identification Number (EIN), while also highlighting the real-world challenges that come with the process.

It is recommended to seek the assistance of a tax professional or attorney to navigate the process successfully. Many will donate their time for a cause you believe in, it is my recommendation to seek someone that is willing to help pro-bono.

 

Step

01

Choose a Mission and Name.

Before filing any paperwork, you’ll need two foundational elements: a clear mission statement and a unique name.

  • Mission Statement: This defines your purpose and how your club will benefit the community. Keep it focused and aligned with the types of missions the IRS approves—typically educational, charitable, or youth development in nature. Example: ‘To help each wrestler in our community reach their full potential through the sport of wrestling, teaching life lessons and creating a safe environment for growth.’
  • Name: Your organization’s name should be distinctive, relevant, and available in your state’s business registry. Examples: Eddyville Youth Wrestling, Titan Wrestling Academy, Wolf Pack Wrestling, Marion Mat Club

Step

02

Obtain an Employer Identification Number (EIN).

The EIN is a unique number issued by the IRS that identifies your organization for tax purposes. You’ll need it to open a bank account, apply for grants, and file tax returns.

Step

03

Form Your Organization.

To officially exist in the eyes of the law and IRS, you must incorporate as a nonprofit in your state.

  • Draft and File Articles of Incorporation: Submit this document to your state’s Secretary of State. Include your name, mission, the names of your initial board members, and a statement that no profits will benefit individuals. Make sure your purpose language matches what the IRS expects for 501(c)(3) organizations.
  • Form a Board of Directors: Most states require at least three directors. Choose individuals who are aligned with your mission and bring governance, financial, or community experience.

Step

04

Draft Bylaws.

Bylaws are your organization’s internal rules. They define how the board operates, how decisions are made, and how often meetings occur. While not filed with the state, they are required by the IRS for your 501(c)(3) application and are crucial for good governance. Resources include:

Step

05

Apply for 501(c)(3) Tax-Exempt Status.

This is where many organizations get stuck.

  • Choose the Right Form: Use Form 1023-EZ if your projected revenue is under $50,000 and assets under $250,000. Use the full Form 1023 for larger organizations or if your mission is more complex.

  • IRS Resource: About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code

  • Filing Fees (as of 2024): Form 1023: $600. Form 1023-EZ: $275.
  • What to Expect: This process can take 6–12 months. The IRS may request additional documentation, and the process often requires multiple rounds of communication. For example, Beat the Streets National had to respond to two rounds of IRS requests before approval—despite working with an experienced team.
  • Pro Tip: You can raise money and accept donations while your application is pending. However, if your application is denied, donations received during that time will not be tax-deductible retroactively.

Step

06

Use your EIN to Register for State and Local Taxes.

Depending on your state and operations, you may need to register for the items below. Check with your state’s nonprofit or revenue office for local requirements.

  • Sales tax: if you sell merchandise.
  • Payroll tax: if you hire staff.
  • Property tax exemption: if you own property.

Step

07

Maintain Compliance.

After you’re approved, the work doesn’t stop. Staying compliant is crucial. We regularly see non-profits that have lost their IRS tax exempt status after failing to file their 990 for three years, this usually happens in a leadership change in the organization, and the new leadership doesn’t know they need to file the 990.

  • Annual IRS Filing: File Form 990, 990-EZ, or 990-N based on your revenue. Failure to file for three years will result in automatic revocation of your tax-exempt status.
  • State Filings: Some states require separate annual reports or charitable solicitation registration.
  • Recordkeeping: Keep detailed records of financials, board meetings, and major decisions. This can be extensive, and great business systems need to be in place.

  • Resource: Nonprofits Are Messy Podcast on Spotify

Challenges to Expect.

Setting up a 501(c)(3) takes time, patience, and attention to detail:

Complexity of Form 1023

This form is long and often requires legal or accounting help. Many well-meaning people start it and never finish. Establish a checklist and meticulously work through it and have an advisor review your work. Save everything in shared drive folders so both individuals can live edit.

Delays

Even with a qualified team, approval can take 6–12 months. Be prepared for back-and-forth correspondence with the IRS.

Ongoing Compliance

It’s common for groups to get approved and then fall behind on filings. That can jeopardize your tax-exempt status and credibility with donors. Filing a 990 or EZ-990 seems scary but is a simple form, just keep good book keeping records and you’ll be in position for it.

Conclusion

Get Help: A tax professional or nonprofit attorney can save you time and prevent mistakes. Many local professionals will donate their time to causes they believe in—don’t hesitate to ask for pro bono assistance. Look to recruit a community member who is a CPA or attorney to do pro-bono [volunteer] work for the formation documents.

Budget Wisely: Incorporation fees, filing fees, legal help, and banking costs can add up. Plan for at least $1,000–$2,000 in startup costs for the paperwork.

Build a Committed Team: Starting a nonprofit is not a solo job. You’ll need board members focused on governance and fundraising, volunteers for operations, and possibly staff to help manage the ongoing work.

Next Lesson.

Lesson 3. Insuring Your Club

Review the types of insurance coverage available to protect your club, coaches, and facilities.