A nonprofit corporation is a corporation formed for purposes other than generating a profit and in which no part of the organization’s income is distributed to its directors or officers. Nonprofit corporations are formed pursuant to state law.
A nonprofit corporation can be a church or church association, school, charity, medical provider, legal aid society, volunteer services organization, professional association, research institute, museum, or in some cases a sports association, among other things. Nonprofit status does not automatically qualify the entity as tax exempt, non profit corporations must apply for tax-exempt status at both the federal and state level.
What Steps Need To Be Taken To Form A Nonprofit Corporation?
- nonprofit articles of incorporation must be filed with the proper state agency;
- tax-exempt status must be applied for with the Internal Revenue Service and proper state agency;
- all corporate formalities and annual meetings of directors and members must be observed;
- Bylaws for the corporation must be prepared and adopted.
Some purposes that are valid for a tax exempt nonprofit corporation are:
- literary, or
- scientific purpose.
Nonprofit corporations may also be formed for other purposes pursuant to different sections of the IRS code.
If your nonprofit is granted tax-exempt status under 501(c)(3) of the tax code, your corporation will be exempt from payment of federal corporate income taxes. Currently, federal income tax rates are between 15% to 34%. Some other benefits include:
- eligibility to receive both public and private grants;
- receive the same limited liability protection as for-profit companies;
- the corporation’s life is not dependent upon its members;
- retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation;
- 501(c)(3) corporations receive lower postal rates on some bulk mailings.
In order to obtain that status, it is critically important that all laws pursuant to non profit, tax exemption are properly followed, all proper forms submitted in a timely way and any follow-up questions from the Internal Revenue Service answered.
Miller, Turetsky has helped many corporations to obtain this status and have assisted them with their goals and objectives.
Nonprofit Organizations promote educational, religious, charitable and other beneficial causes in our community. It is important to understand the complexities involved in the formation of a Nonprofit Organization as they are abundant. Formation and upkeep require a lot of paperwork and compliance with many laws including federal tax law, state and local law. At Miller, Turetsky, Rule & McLennan, we assist clients in determining the proper structuring of their organization, assist in writing bylaws and file articles of incorporation with the Department of State along with many other responsibilities which are accrued when starting and operating a Nonprofit Organization. If you are considering starting a Nonprofit Organization or already have created one and need management, please contact us to help you.