When establishing a mosque as a non-profit entity, you have several options for its legal structure. Understanding the differences is crucial for protecting your members and the organization's future.
The three common structures to consider are:
Unincorporated Association
Limited Liability Company (LLC)
Non-Profit Corporation (often a type of C-Corporation)
Here is a breakdown of why two of these are not suitable and which one is recommended.
1. Unincorporated Association
This is the simplest way to organize, but it comes with significant risks.
Problem: Full Personal Liability
All members, directors, and employees can be held personally responsible for the organization's debts and lawsuits. If someone is injured on the property, every member's personal assets could be at risk.
Problem: Unsafe Property Ownership
This structure is not a separate legal entity, making it unsafe for the group to own a building. If property is held in an individual's name, the mosque could lose it if that person (or their heirs) later decides to reclaim it.
2. Limited Liability Company (LLC)
While an LLC offers liability protection, it is generally not a viable option for a new community-led mosque.
Problem: IRS Restrictions for Non-Profits
The IRS will only grant non-profit status to an LLC if all of its members are other non-profit organizations, not individuals. Since a mosque is founded by individual community members, it does not meet this requirement.
3. Non-Profit Corporation
This is the standard and most secure structure for a non-profit organization like a mosque.
Solution: Protects Members from Liability
A corporation is a separate legal entity, which shields members and directors from being personally responsible for the organization's debts and legal actions.
Solution: Secure Property Ownership
The corporation can safely and legally own property, such as the mosque building, in its own name.
Solution: The Standard for Non-Profits
This is the generally accepted legal structure for organizations seeking 501(c)(3) tax-exempt status from the IRS.
To ensure legal protection for members and secure ownership of assets, a mosque should be established as a Non-Profit Corporation. You should avoid operating as an Unincorporated Association or an LLC.
1. Choose a Corporate Name
Ensure the name is unique. You cannot use a name already registered by another organization in your state.
Follow state naming rules. States prohibit certain words to prevent misleading the public. Check your state's guidelines for restricted words.
2. Hold the First Organizational Meeting Gather the founders to formally vote on and document the following key decisions:
Ratify the decision to incorporate. This is the official vote to create the legal entity.
Appoint a Board of Directors. Appoint at least a President, Treasurer, and Secretary. Directors are legally responsible for overseeing the organization, guiding its mission, and making major decisions.
Appoint an Incorporator. Designate an attorney or a trusted individual to prepare and file the incorporation paperwork with the state.
Designate a Registered Agent. This is a person or service with a physical street address in the state who will receive official legal and government mail. This address can be moved to the masjid's physical location once it is established.
Approve Governing Documents. Formally discuss and approve the organization's bylaws, operating agreements, and internal policies.
Decide on Asset Dissolution. Determine where the masjid's assets will go if the organization ever dissolves. These assets must go to another registered non-profit organization, preferably another masjid.
Start an Official Record Book. Begin keeping official minutes of this and all future meetings. This is a legal requirement.
3. File the Articles of Incorporation The incorporator will file the official "Articles of Incorporation" document with the Secretary of State (or the appropriate state agency). This document must include:
A "Purpose Clause." This statement, taken from your bylaws, should clearly explain the masjid's vision, mission, and goals.
Required IRS Language. To secure 501(c)(3) tax-exempt status, it is critical to include the following clause:
"This corporation is organized exclusively for charitable, religious, and educational purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code."
Your Dissolution Plan. State which non-profit organization will receive the masjid's assets upon dissolution, as decided in your meeting.
Pay the Filing Fee. Submit the completed Articles of Incorporation along with the required state fee.
4. Receive State Confirmation
Once the state reviews and accepts your filing, the masjid is officially incorporated as a legal non-profit entity.