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Form Your Nonprofit Corporation

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Nonprofit Corporations are formed for purposes other than making a profit, usually by groups involved in activities that typically benefit society in general.

Members occupy the position held by stockholders in a for-profit corporation and, along with the directors and officers, are entitled to the same limited liability afforded standard corporations.

Dues paid or donations made would normally be the most that members, directors and officers could lose. As with other corporations, limited liability does not apply if the corporate form has been used to perpetuate a fraud or evade the law.

Nonprofit Status and Tax Exemption

Tax exempt status is not automatic and all nonprofit corporations are not necessarily tax-exempt. Nonprofit status is a function of state law but tax-exempt is a status is a function of federal law and in some states a nonprofit corporation must also apply for tax-exempt status at the state level as well. In order to qualify for tax-exempt status, the corporation must be organized for one of the purposes allowed in the Internal Revenue Code.

Obtaining tax-exempt status is generally required in order to be eligible to receive grants from the government and private foundations. A tax-exempt status also allows donors to deduct contributions from their income taxes. In a nonprofit corporation, any money that remains as profits, after deducting expenses from gross receipts, cannot be distributed to the members, directors or officers but must be used to further the corporation’s purposes.

Why Form a Nonprofit Corporation?

Those uniting to provide services that will benefit society frequently form a nonprofit corporation in order to give its members, directors and officers limited liability protection and, when possible, enjoy the benefits of a tax-exempt status.

MaxFilings can help you form your Nonprofit Corporation. Start setting up your nonprofit corporation now >>

Some Points to Consider When Forming a Nonprofit Corporation

  • Official documents must be filed with the appropriate state in order to form a non profit corporation and  state filing fees must be paid
  • A nonprofit corporation is considered by the law to be an individual entity
  • Any “profits” must be used to further the goals of the corporation
  • The life of a nonprofit corporation is perpetual

    Limited Liability
  • Members, directors and officers have limited liability
  • Dues paid and contributions is usually the maximum members, directors and officers can lose
  • Members, directors and officers are not normally liable for legal judgments against the corporation
  • Limited liability will not apply in cases where the corporation has been used to perpetuate fraud or evade the law

    Taxation
  • All nonprofit corporations are not tax exempt
  • Nonprofit corporations must apply for tax exempt status
  • The corporation must be organized for one of the purposes allowed in the Internal Revenue Code to qualify for tax exempt status
  • Tax exempt status makes the corporation eligible to receive government and private foundation grants
  • Raising money is easier since a tax exempt status allows donors to deduct contributions to the corporation from their income taxes

     Public Perception
  • The public can feel more comfortable about contributing to a formal corporation

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© 2008 MaxFilings.com All Rights Reserved. DISCLAIMER: MaxFilings, Inc. is a service company and does not provide legal or financial advice. The information provided on this site is for general information purposes only and not legal advice. MaxFilings is not a law firm, does not offer legal advice and is not a substitute for a law firm or an attorney. Your use of this site is at your own risk and is subject to the terms and conditions in ourÊfull disclaimer found at: www.maxfilings.com/disclaimer.html