Business Law
Non-Profit Incorporation
Non-Profit Incorporation Quick Facts
- Non-profit corporations must be formed to benefit either the public, a specific group of individuals, or the non-profit's membership
- A non-profit corporation can be a religious organization such as a church, a political organization, a credit union, or a membership club
- A non-profit corporation can be exempt from income, property, and sales taxes
- Only a non-profit corporation can receive public and private grants along with tax-free donations
- Most importantly, a non-profit corporation is a separate entity that shields your personal assets from liability
Non-Profit Incorporation Overview
The two main reasons why people decide to form a non-profit corporation are that non-profit corporations may be exempt from federal income taxes and that it shields individual's assets from liability. In order to have your non-profit corporation exempt from federal taxes, you must qualify. There are about 27 types of non-profit organizations that are exempt from federal income taxes. The most common non-profit organizations that seek tax exemption are 501(C)(3) and 501(C)(7). A 501(C)(3) is a non-profit for charitable, religious, or education purposes. A 501(C)(7) is a non-profit for recreational and social clubs. Click here to see if your organization will qualify (for tax purposes).
In order to insure that the IRS grants tax-exempt status, non-profit corporations ordinarily have at least three directors that are not related. Like all corporations, a non-profit corporation must keep personal and corporate assets separated. A non-profit corporation must obtain its own Employer Identification Number (EIN). A non-profit corporation must also hold annual meetings and record them in writing.