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Nonprofit Corporation
What is a nonprofit corporation?
- A nonprofit corporation is a corporation that is formed that does not have a profit motive. In general the nonprofit corporation is formed pursuant to a different state law than a standard for-profit corporation. The corporation is formed for a religious, charitable, educational, literary or scientific purpose. Nonprofit corporations can apply for tax-exempt status at both the federal and state level.
What are the advantages of filing a nonprofit corporation?
Under 501(c)(3) of the Tax Code, if your nonprofit is granted tax-exempt status your corporation will be exempt from payment of federal corporate income taxes. Individual donors can claim a federal income tax deduction of up to 50% of income for donations made to 501(c)(3) groups.
In addition, a nonprofit is
eligible to receive both public and private grants.
Nonprofits also receive the same liability protection as for profit
companies, i.e., directors or trustees, officers and members are typically
not personally responsible for the debts and liabilities of the
corporation.
What purposes are valid for a nonprofit corporation?
Under 501(c)(3) of the tax code,
to qualify for federal tax-exempt status, the nonprofit corporation must
be organized and operate for some religious, charitable, educational,
literary or scientific purpose.
The religious category encompasses general types of religious
organizations as well as more formal institutionalized churches.
The charitable category refers to services beneficial to the public
interest.
The educational purpose is defined as a purpose that allows for
instruction for both self-development and the benefit of the community.
The literary purpose includes writing, publishing and distribution of literature which is utilized to promote the public interest as opposed to commercial book writing and selling.
The scientific purpose is
delineated as scientific research that is carried on in the public
interest rather than research incidental to commercial or industrial
operations.
The purpose must be listed in the articles of incorporation. Therefore,
we ask all our nonprofit clients to list the purpose in detail in the
comment section of the order form.
What specific steps are necessary in order form a nonprofit corporation?
The first step in the process, is
to prepare and file the nonprofit articles of incorporation with the
proper state authority. The articles must contain the required language in
order to qualify for tax-exempt status. Incorporatetime.com prepares and
files nonprofit articles of incorporation.
Tax-exempt status must be applied for at both the federal and state levels
after the nonprofit articles are filed. To apply at the federal level, a
timely filing of form 1023 must be made. The 1023 application must be
postmarked within 15 months after the end of the month when your articles
were filed. Furthermore, as long as you file on time, the
tax-exemption is effective retroactively to the date on which your
articles of incorporation were filed. This step must be complied with by
one of the principals of the nonprofit corporation.
Incorporatetime.com does not prepare IRS form 1023.
Incorporatetime.com does not obtain 501(c)(3) status. To determine
what form needs to be filed at the state level, contact your state
department that deals with taxation.
The corporation must hold annual meetings of directors and members and
comply with corporate formalities. Bylaws must also be adopted for the
corporation. Our corporate kit contains documents
that help you comply with these corporate formalities.
How many directors are nonprofit corporations required to have?
- Most states require nonprofit corporation to have a minimum of three directors.
- However there are exceptions, and specific state laws do change, therefore we do recommend that you call us if you have a question in this regard.
- Currently, the following
states only require, at minimum, one director: CA, CO, DE, IA, KS, MI,
MS, NH, OK, OR, PA, SC, VA, WA & WV.
In addition, the following states allow less than three directors if there are less than three members: LA, MA, MN & VA. - How do I file for my nonprofit corporation?
IncorporateTime.com will file and execute all the necessary paper work and documentation to file your nonprofit corporation. Simply utilize our online order form or call 1-800-600-2841 to place your order over the phone.
