What Is a Nonprofit Corporation?
A nonprofit corporation (NPO) is an organization that uses its surplus funds or “profits” to advance a particular purpose. Unlike a for-profit corporation, a nonprofit’s income is not distributed to owners, the board of directors, officers, or shareholders. Nonprofits are involved in many areas and are frequently created as a public service. They are used to manage charities or to support the fine arts, healthcare and research, education, political awareness, religion, and countless other activities. Hybrid nonprofit corporations, such as cooperatives that are equally owned by members and/or employees, are also growing in popularity in areas like farming, grocery stores, and medical dispensers.
How Is a Nonprofit Like a Regular Corporation?
In many ways, nonprofit corporations are similar to traditional for-profit corporations. Each nonprofit corporation is a distinct legal entity and is typically treated the same way a corporation is under law. Nonprofits may enter into business dealings with other persons and companies, may write and sign contracts, and may own property. Nonprofits are also structured like traditional corporations. Each has its own directors or “trustees,” officers, management, and can also hire employees.
How Is a Nonprofit Different from a Regular Corporation?
Unlike for-profit corporations, the income earned by a nonprofit must be invested back into the nonprofit’s intended purpose or to support and maintain the organization itself. While a nonprofit may pay salaries to its employees, managers, and directors, it cannot have shareholders or stock. Due to their public service nature, many nonprofit organizations are eligible to be classified as a 501(c) organization by the IRS. While most nonprofits must maintain annual financial records and submit tax returns each year, nonprofits that have 501(c) status are exempt from paying taxes on most or all of their earnings. Also, individuals or companies who make donations or give other assistance to organizations with 501(c) status can write-off these contributions on their taxes.
Create Your Nonprofit Corporation Using The Document People
To create a nonprofit corporation, you must prepare Articles of Incorporation and submit them to the Secretary of State in the state where you plan to operate. If you wish to obtain 501(c)3 status for tax exemption, you must begin a separate application process with the IRS. We can prepare all the necessary documentation and paperwork to get your nonprofit incorporated more quickly and easily than anyone else.
Our complete package includes everything you will need for that all-important first year, including:
- Name Search — Preparation of the Articles
- Corporate Kit — Seal — Membership Certificates
- Initial Minutes — Customized Bylaws
- 501c3 EZ applications now available for an extra fee
If you’re ready to make your non-profit a reality, GET STARTED NOW!
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What is the 501(c)3 status?
According to the California Attorney General, “Section 501(c)(3) organization must be “organized and operated exclusively for religious, charitable, scientiﬁc, testing for public safety, literary or educational purposes.” To qualify, an organization must satisfy an organizational test and an operational test. The organizational test is met if the articles of incorporation include language limiting the purposes of the organization to one or more of the exempt purposes set forth in section 501(c)(3) and do not empower the organization to engage in any substantial activities which do not further one or more exempt purposes.
“In addition, the organizational documents (or applicable state law) must require the organization to expressly dedicate its assets to exempt purposes in the event of a dissolution.”