Business Legal Entity: C-Corporation
Masjid can stay as unincorporated association but it will have the following problems:
All members of an unincorporated masjid can legally be found responsible for the negligent or criminal acts of one of their fellow members, directors or employees
It is hard to own a real property (like a masjid) without forming a business entity (using an individually own property is not recommended)
Usually, business entities can be sole proprietor, LLC, partnership, S-corporation and C-corporation
However, non-for profit organizations are generally classified as C-corporations
Therefore, do not use LLC, partnership or S-corporation for your masjid
How To Incorporate Your Masjid
General meeting of the members for ratification of the incorporation decision through a general vote
Appoint an attorney or someone to act as the incorporator who will process the incorporation paperwork
Designate a registered agent. This is a person or an entity with a physical address in the state who can accept official mail on behalf of the masjid. Once a masjid is built or purchased, move the address to the masjid’s physical address.
Fill the state nonprofit articles of incorporation on secretary of state's website or other state website for the agency that processes business registrations
You will need a purpose clause that is taken from the masjid's bylaws
You will be asked to decide where the fund would go if the masjid is dissolved. You may choose another masjid or non-for-profit
File the non-profit articles of incorporation with the state and pay the fee
Once the state accepts the filing, the masjid is incorporated
Filing for 501(c)(3) non-for-profit status
Obtain Employer Identification Number (EIN) from the IRS website
The bylaws must be ready and ratified by members (a copy of the bylaws must be summitted with the application)
There must be a conflict of interest policy in the bylaws
File form 1023 with the IRS. If the organization is large, it is better to do through a lawyer (it might cost about $5000)
File sales tax exemption with the state