| |
Nonprofit Corporations
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
corporations?
6. What are the advantages of a nonprofit corporation?
7. Disadvantages of a Nonprofit Corporation?
8. 501c3 Tax Exempt Filing
1. What is a nonprofit
corporation?
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.
[top] [order]
2. What steps need to be
taken to form a nonprofit corporation?
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.
[top] [order]
3. When should a nonprofit
corporation be established?
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.
[top] [order]
4. How do we apply for federal
tax-exempt status?
For a nonprofit company to
qualify for 503(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
corporationcan be assured that contributions made to it are
tax deductible, and that the corporation is tax-exempt.
[top] [order]
5. How many directors are
required for a nonprofit corporation?
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.
[top] [order]
6. What are the advantages
of a nonprofit corporation?
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.
[top] [order]
7. Disadvantages of a Nonprofit
Corporation?
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.
[top] [order]
8. 501c3 Tax Exempt Filing
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.
[top] [order]
|
|
