501(c)(8) Organization: What is It and How Do You Start One?

There are many types of nonprofits, so what is a 501(c)(8)? 501(c)(8) organizations are fraternal beneficiary societies. They provide a unique opportunity for individuals with shared interests or vocations to unite and support each other through various benefits and charitable activities. 

This guide explores the definition, eligibility criteria, and steps to start a nonprofit 501(c)(8) organization. It also explores how to create a thriving fraternal society that positively impacts its members and the community and how to gain tax exempt status.

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Table of Contents

• What is a 501(c)(8) Nonprofit Organization?

• Eligibility Criteria for 501(c)(8) Organizations

• 501(c)(8) vs 501(c)(3): Similarities and Differences

• 6 Steps to Start a 501(c)(8) Organization

• Final Thoughts on 501(c)(8) Organizations

• FAQs on 501(c)(8) Status

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What are 501(c)(8) Fraternal Benefit Societies?

The Internal Revenue Code (IRC) defines a 501(c)(8) nonprofit organization as a fraternal beneficiary society that must pay for life, sickness, accident, or other benefits. These societies operate under a lodge system, where members share common bonds, principles, or callings. 

The IRS recognizes 501(c)(8) organizations as tax-exempt, allowing them to focus on supporting their members and engaging in charitable activities.

501(c)(8), fraternal organizations may pay directly for their members’ insurance or other benefits. They often partner with third-party insurance companies to offer insurance services.

Like 501(c)(4) or 501(c)(6) nonprofits with tax exemption, fraternal benefit societies can participate in political activities, but it cannot be their primary purpose. The money spent on such activities is not tax-deductible.

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Examples of 501(c)(8) Organizations

Knights of Columbus

The organization started in 1882 as a congregation of Catholic men. Its members are connected by their Catholic beliefs, and its primary principles are charity, unity, fraternity, and patriotism.

Elks

‍The organization, formerly known as the “Jolly Corks,” was started in 1868 as a group of actors and theatre professionals. It operates on charity, justice, brotherly love, and fidelity. The organization provides scholarships, veterans’ services, and drug awareness programs.
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Royal Neighbors of America‍

It was started in 1895 by nine women to support other women. The organization protects its members and offers benefits like life insurance and annuities.
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Modern Woodmen of America‍

This is a member-owned fraternal financial services organization established in 1883. It has nearly 730,000 members and focuses on touching lives and securing futures.

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Eligibility Criteria for 501(c)(8) Organizations

The IRS enlists several requirements for nonprofit organizations to acquire a 501(6c)(8) tax-exempt status:

• An organization must have a fraternal purpose, which means its membership is based on a shared interest, goal, or background. The organization must also have a substantial program of fraternal activities that aligns with this common purpose.

• An organization must operate under a lodge system consisting of a parent organization and subordinate units (lodges or branches). These subordinate units must follow the parent organization's bylaws, membership levels, rights, and privileges. The parent charters are self-governing subordinate organizations (called lodges or branches).

• An organization must provide life, sick, or accident insurance and other benefits to members of the society or their dependents.

• An organization must have clearly defined membership standards, including membership tiers, admission process, and a list of rights and privileges.

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501(c)(8) vs 501(c)(3): Similarities and Differences

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6 Steps to Start a 501(c)(8) Organization

• Step 1: Choose Your Organization’s Name

• Step 2: Create Your Mission Statement

• Step 3: Establish the Nonprofit Board

• Step 4. Determine if you need a parent organization

• Step 5: Define Your Bylaws

• Step 6: Apply for an Employer Identification Number (EIN)

• Step 7: Submit Form 1024 to Become a Tax Exempt Organization

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1. Choose Your Organization’s Name

Your nonprofit’s name must showcase its purpose and what it intends to accomplish. Pick a name that will be memorable. Check your state’s criteria before choosing your nonprofit’s name.

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2. Create Your Mission Statement

The mission statement should clearly define what your nonprofit does and how it helps improve people’s lives. You can use your mission statement to spread awareness about your nonprofit through marketing channels.

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3. Establish the Nonprofit Board

Form a Board of Directors to help you finalize your mission statement and bylaws, among other responsibilities.

Your board members will lead the entire team and should be able to support your nonprofit’s operations and fundraising efforts.

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4. Determine if you need a parent organization

Local branches of 501(c)(8) organizations must be chartered by a parent organization. Even though they are self-governing, knowing which way you'd like to operate is helpful.

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5. Define Your Bylaws

When creating bylaws for your 501(c)(8) organization, the Internal Revenue Code asks that you include essential information such as: 

• Organization's name

• Purpose of the fraternal benefit society

• Board member roles and responsibilities

• Membership details

• Meeting frequency

• Conflict of interest policies

• Dissolution procedures

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If you are a subordinate unit in a lodge system of fraternal societies, your bylaws may mirror those of the parent organization.

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6. Apply for an Employer Identification Number (EIN)

Applying for an EIN is necessary to fill out IRS Form 1024, even if you do not plan on hiring team members. Fraternal societies will require this information.

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7. Submit Form 1024 to become a tax exempt organization

You must file Form 1024 with the IRS to claim tax exempt status.

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Unlike 501(c)(3) nonprofits, there is no deadline to file for tax-exempt status. If you do not receive your letter of determination from the IRS after submitting the form, you must file tax Form 990.

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If you start as a small 501(c)(8) nonprofit in a lodge system, your parent organization might have completed some of these steps. Contact your parent group to clarify the steps you must complete. 

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Case study: How Knights of Columbus Lexington Council 94, a 501(c)(8) Organization Raised Over $3,800 Using Zeffy

Knights of Columbus Lexington Council 94 successfully organized their "K'Night at the Races" event using Zeffy's 100% free ticketing system. By leveraging Zeffy's user-friendly platform, they raised over $2,500 through ticket sales and saved $125 in fees. 

The council also secured corporate sponsorships totaling $1,370, saving an additional $70 in fees. 501(c)(8) organizations can organize events and initiatives like the Knights of Columbus Lexington Council 94 did using Zeffy's 100% free and comprehensive features.

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Final Thoughts on 501(c)(8) Organizations

Establishing a 501(c)(8) nonprofit organization can be fulfilling to create a strong community of like-minded individuals. Your domestic fraternal society can make a significant difference by providing benefits and engaging in charitable activities. 

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FAQs on 501c8 Fraternal Societies

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