A Kentucky Nonprofit Corporation is sometimes called a Kentucky Not-For-Profit Corporation.

A Kentucky Nonprofit Corporation is an organization that is legally registered with the Kentucky Secretary of State.  While the federal government must approve the tax-exempt status of a Kentucky Nonprofit Corporation, a Kentucky Nonprofit Corporation is not initially registered with any US government agency.

A Kentucky Nonprofit Corporation is an organization that works to serve some kind of public interest rather than to provide financial benefit to any particular individuals or entities.

Many Kentucky Nonprofit Corporations have much in common with Kentucky For-profit Corporations.  This includes the liability protection that comes with a legally registered Kentucky Nonprofit Corporation.  A lot of Kentucky Nonprofit Corporations hire managers and employees just like a Kentucky For-profit Corporation does.  The application process for a Kentucky Nonprofit Corporation is very similar to that of a Kentucky For-Profit Corporation.

Contrary to popular belief, Kentucky Nonprofit Corporations can and do make money.  In a Kentucky Nonprofit Corporation, any profits must legally go directly back into the Kentucky Nonprofit Corporation.

The short answer is no. The state of Kentucky does not legally require a lawyer to form a Kentucky Nonprofit Corporation.  However, if there is anything about forming a Kentucky Nonprofit Corporation that you're not sure about you should seek the advice of a competent Kentucky lawyer, a Kentucky accountant, or both BEFORE you Incorporate.

Once you have made the decision to Form a Kentucky Nonprofit Corporation, a lawyer can file your documents and act as a middle man for a few hundred dollars an hour; or you can use an online service provider like All Business Documents to perform these services and save money that you can use in your new Kentucky Nonprofit Corporation.

A Kentucky Nonprofit Corporation is formed to provide some kind of public or community benefit.  Unlike the other types of Kentucky Corporations and LLCs, a Kentucky Nonprofit Corporation may be eligible for certain benefits, including tax exemptions on both the state and federal levels.  Depending on the nature of the organization, some Kentucky Nonprofit Corporations may not be eligible for tax exempt status.  A Kentucky Nonprofit Corporation may also be eligible for public and private grants.  A Kentucky Nonprofit Corporation is formed in a similar way as that of forming a Kentucky For-profit Corporation.  Kentucky Nonprofits must file Articles of Incorporation in the same way that Kentucky For-profit Corporations do.

A Kentucky Nonprofit Corporation comes with the same liability protection as the other types of Kentucky Corporations.  The main difference between a Kentucky Nonprofit Corporation and a Kentucky For-profit Corporation is how the profits of the Kentucky Corporation are distributed,  In a Kentucky For-profit Corporation profits can be distributed to shareholders.  Kentucky Nonprofits are legally required to use the income to further a goal that benefits the community or some part of the public.

While most federal tax exempt organizations are Nonprofit Corporations, registering a Kentucky Nonprofit Corporation does not automatically qualify the Kentucky Nonprofit for tax exempt status at the federal level.  The IRS recognizes various types of tax exempt Nonprofit Corporations.  To receive federal tax exempt status a Kentucky Nonprofit Corporation must file forms with the Internal Revenue Service.  The forms can get very complex depending on the nature of the Nonprofit.

Also, a Kentucky Nonprofit Corporation cannot legally use its resources for propaganda or to further a political cause or to support a candidate for public office.

One of the major responsibilities of a Kentucky For-profit Corporation is to increase shareholder value.  For most Kentucky Corporations the pursuit of shareholder value is done without regard for specific benefits to the public.  The only benefits that matter are those that benefit the shareholders, who are the owners of the Kentucky Corporation.  Kentucky For-profit Corporations often face pressure to abandon social goals in order to increase their bottom line.

Kentucky Nonprofit Corporations are formed to provide some kind of public benefit but may be restricted in their ability to raise capital when they need to grow.

The state of Kentucky has created a new kind of For-profit Corporation which has a legal responsibility to include some kind of public benefit in their Corporate operating requirements.  A Kentucky Corporation of this kind is called a Kentucky Benefit Corporation or a Kentucky B Corporation.

Benefit Corporations are a hybrid between a For-profit and nonprofit Corporation.  Operating capital is easier to raise for a Kentucky Benefit Corporation and the Kentucky Benefit Corporation is required to provide some kind of public benefit.

Benefit Corporations do not have any special tax breaks or benefits.  Benefit Corporations are taxed just like any other Kentucky Corporation is taxed.

To qualify as a Kentucky Benefit Corporation, a Corporation must have an explicit social or environmental mission, and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders.  A Kentucky Benefit Corporation must also publish independently verified reports on its social and environmental impact alongside its financial results. 

Some examples of the specific public benefit that a Kentucky Benefit Corporation must provide, among others, include:

• Providing low-income or under served individuals or communities with beneficial products or services
• Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business
• Preserving the environment
• Improving human health
• Promoting the arts, sciences or advancement of knowledge

No one person or group of people can own a Kentucky Nonprofit Corporation.  Once it is incorporated, the Kentucky Nonprofit Corporation is a separate legal entity from its founders, directors, officers, and employees.  The Kentucky Nonprofit Corporation itself owns assets of the business and is entitled to receive all revenues from its operation.  Any equity in a Kentucky Nonprofit Corporation belongs to the organization itself, not to the founders, board of directors or staff.

In addition, a Kentucky Nonprofit Corporation cannot be sold to another individual, corporation or organization.

Contrary to popular belief a Kentucky Nonprofit Corporation may actually make a profit.  Many Kentucky Nonprofit Corporations derive much of their funding from tax-exempt donations.  Sometimes a Kentucky Nonprofit Corporation can receive more in donations that the costs to actually run the organization.

A Kentucky For-Profit Corporation may distribute any excess assets to its owners or shareholders.  There is no distribution of assets in a Kentucky Nonprofit Corporation.

In a Kentucky Nonprofit Corporation all of the money earned by or donated to the Kentucky Nonprofit organization is used in pursuing the organization's objectives as stated in its Articles of Incorporation.  Any excess capital after the close of the Kentucky Nonprofit Corporation's fiscal year must be kept in the Kentucky Nonprofit's accounts.

The state of Kentucky does not have a Corporate income tax so there is no need for a Nonprofit Exemption from Kentucky Corporation income taxes.

501(c) refers to a section of IRS code which deals with tax exempt organizations including, but not limited to, Nonprofit Corporations.

The most common type of tax-exempt organization falls under section 501(c)(3) of the IRS code.  This section of the IRS code allows a Kentucky Nonprofit organization to be exempt from federal income tax if its activities include any of the following purposes:

• Charitable
• Religious
• Educational
• Scientific
• Literary
• Testing for public safety
• Fostering amateur sports competition
• Preventing cruelty to children or animals

There are other types of 501(c) tax exempt organizations defined in the IRS code - 29 of them - but 501(c)(3) tax exempt organizations are by far the most common in the state of Kentucky and the US.

One advantage to qualifying to be a 501(c)(3) tax exempt organization is that most foundations will only make grants to 501(c)(3) Nonprofits. 

Tax exemption does not excuse a Kentucky Nonprofit organization from maintaining proper records and filing any required annual or special-purpose tax returns if they are required.  Failure to file required returns such as Form 990 (Return of Organization Exempt From Income Tax) may result in fines.

One prohibition for 501(c)(3) organizations is that they are prohibited from conducting political campaign activities to intervene in elections to public office.  There are, however, provisions which may allow some 501(c)(3) organizations to legally lobby to influence legislation.

BEFORE you apply with the IRS for 501(c)(3) Tax Exempt status it will need the following:

• Articles of Incorporation approved by the Kentucky Secretary of State
• Bylaws
• Federal Employer Identification Number (EIN)
• Statement of purpose that meets IRS requirements
• Statement that your Nonprofit Corporation will not engage in prohibited political or legislative activities
• A Plan of Dissolution describing the distribution of assets upon dissolution

There is also very specific language which needs to be included in your Articles of Incorporation which are filed with the Kentucky Secretary of State if you want to get 501(c)(3) Tax Exempt Status.

When a Nonprofit Corporation dissolves all remaining assets must be distributed to other active Nonprofits.  None of the remaining assets can be distributed to any directors, members or staff.