A Nonprofit Corporation is formed to provide some kind of public or community benefit.
Unlike the other types of Corporations and LLCs, a 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 Nonprofit Corporations may not be eligible for tax exempt status.
A Nonprofit Corporation may also be eligible for public and private grants.
A Nonprofit Corporation is formed at the state level in a similar way as that of forming a for-profit Corporation.
Nonprofits must file Articles of Incorporation in the same way that C Corporations do.
A Nonprofit Corporation comes with the same liability protection as the other types of Corporations.
The main difference between a Nonprofit Corporation and a for-profit Corporation is how the profits of the Corporation are distributed,
In a for-profit Corporation profits can be distributed to shareholders.
Nonprofits are legally required to use the income to further a goal that benefits the community or some part of the public.
The most common types of Nonprofit Corporations are:
- Public-benefit Nonprofit Corporations
Organized for the general public benefit, rather than for the interest of its members or shareholders
Formed primarily for social, educational, recreational or charitable purposes
Examples are food banks and youth sports organizations
- Religious Corporation
Organized to promote religious purposes
Subject to less complicated filing and reporting requirements than other types of Corporations
May be exempt from regulations governing non-religious groups performing the same services
- Mutual-benefit Nonprofit Corporation
Serves its members in ways other than just distributing profits to them
Cannot obtain IRS tax-exempt status as a charitable organization
Pays the same taxes as for-profit Corporations
Examples are homeowners associations or a public utility companies
Each type is treated a little differently legally and admin istratively depending on the state in which they are Incorporated.
While most federal tax exempt organizations are Nonprofit Corporations, registering a Nonprofit Corporation at the state level does not
automatically qualify the Nonprofit tax exempt status at the federal level.
The IRS recognizes various types of tax exempt Nonprofit Corporations.
To receive federal tax exempt status a 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 Nonprofit Corporation cannot legally use its resources for propaganda or to further a political cause or to support a candidate for
public office.
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