A nonprofit corporation is a company or organization setup for purposes other than making a profit. Typically non-profit companies exist for the public good and provide mutually beneficial products or services. Like a standard for-profit corporation, nonprofits provide limited liability protection to their owners, meaning the personal assets of directors and officers typically cannot be used to payoff the debts or liabilities of the nonprofit.
Pros and Cons of Non-Profit Corp Setup
Pros of Nonprofit Corporation:
Limited liability protection. Directors and officers are typically not personally responsible for the nonprofit’s debts and liabilities.
Tax-exempt status. Nonprofit corps can apply for both federal and state tax-exempt status.
Access to grants. Some nonprofit corporations are eligible to receive public and private grants, making it easier to get operating capital.
Tax-deductible donations. With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible.
Cons of Nonprofit Corporation:
Complicated rules and paperwork. Noprofit corporations, like regular corporations, are required to hold formal board and shareholder meetings. In addition, there are a series of tax forms that may need to be filed with federal, state, and possibly even local governments. The tax forms for nonprofit corporations can be very complicated and this may require the help of an experienced accountant.
How to Start a Nonprofit Corporation
Non-profit Articles of Incorporation must be filed with the state and state filing fees paid. In order for your nonprofit to become tax-exempt, Form 1023 must be filed with and approved by the IRS. Some states also require a state-level tax-exempt filing. Let us help you get started >
