1. What is a nonprofit corporation?
2. What steps need to be taken to form a nonprofit corporation?
3. When should a nonprofit corporation be established?
4. How do we apply for federal tax-exempt status?
5. How many directors are required for a nonprofit corporation?
6. What are the advantages of a nonprofit corporation?
7. Disadvantages of a Nonprofit Corporation?
8. 501c3 Tax Exempt Filing
A nonprofit corporation is not formed with the intent to realize a profit, but is established for a religious, charitable, educational, literary or scientific purpose. Qualifying nonprofit corporations will be granted tax-exempt status by both federal and state authorities.
Articles of incorporation must be filed with the proper state agency. These articles of incorporation must contain specific paragraphs in connection with the nature of the nonprofit activities. We will prepare and file the nonprofit Articles of Incorporation.
A nonprofit corporation must apply for tax-exempt status with both federal (IRS Form 1023) and state authorities. We do not prepare IRS form 1023, but will provide the proper documents for your completion upon your request.
A nonprofit corporation must follow certain corporate formalities, including the adoption of By-Laws. Many documents which will assist in complying with these formalities are contained in our Nonprofit Corporate Kit.
A nonprofit corporation should be organized when the intent is to pursue a religious, charitable, educational, literary or scientific purpose permitted under 501(c)(3) of the tax code. The specific purpose of the nonprofit corporation must be properly set forth in its articles of incorporation so that nonprofit and tax-exempt status may be obtained.
For a nonprofit company to qualify for 501(c)(3) federal tax-exempt status, it must file IRS form 1023. Filing of Form 1023 must be postmarked within 15 months after the end of the month when the Articles of Incorporation were filed.
The tax-exemption is effective retroactively to the date on which your Articles of Incorporation were timely filed. When the IRS approves the tax-exemption, the nonprofit corporation can be assured that contributions made to it are tax deductible, and that the corporation is tax-exempt.
Most states require nonprofit corporations to have a minimum of three directors, however CA, CO, DE, IA, KS, MI, MS, NH, OK, OR, PA, SC, VA, WA & WV require a minimum of only one director. In LA, MA, MN and VA less than three directors are permitted if the nonprofit corporation has less than three members.
If your nonprofit is granted tax-exempt status under 501(c)(3) of the Tax Code, your corporation will be exempt from payment of federal corporate income taxes. In addition, a 501(c)(3) nonprofit corporation may receive both public and private grants. Further, individual donors can claim a federal income tax deduction of up to 50% of income for donations made to 501(c)(3) groups.
Nonprofit corporations also enjoy the same limited liability protection as for profit corporations. Accordingly, directors or trustees, officers and members are typically not personally liable for the debts and obligations of the nonprofit corporation.
Other benefits include perpetual or unlimited life for the corporation; retirement funds and retirement plans may be established more easily; 503(c)(3) corporations receive lower postal rates on certain bulk mailings.
Increased paperwork that is required, including by-laws of corporation and the minutes of meetings which must be recorded and kept with other corporate records.
Form-A-Corp can assist by preparing and filing your incorporation papers, and our Nonprofit Kit contains preprinted sample by-laws and minutes of meetings. In addition, applications for tax-exempt status must be filed at both the federal and state levels.
The primary benefits of tax exempt status include:
- Donors can make charitable contributions and receive a tax deduction. Most often donors will refuse to offer funding if they will not receive a tax deduction.
- The organization will be qualified to receive private and public grant money.
- As an tax exempt organization you can save money on lower postage rates on corporate mailings.
- If you are looking to form a nonprofit, you will need to go through nonprofit registration and nonprofit filing.
Here at Form-A-Corp, we can not only guide you through the process, we can aid you in completing all necessary forms to quickly get the tax exempt status so you can begin to receive donations.
Applying for the nonprofit status can be both tedious and complex. If an inexperienced individual attempts to complete the IRS application, and does it incorrectly, it can add months of delays to your approval from the IRS.
Most of our clients who chose to take advantage of our 501c3 services, through our educated and experienced staff, benefited with a faster approval by completing the IRS application quickly and correct the first time.