A Non-Profit Corporation is a legally recognized organization that operates for charitable, educational, religious, or public service purposes. Unlike for-profit businesses, non-profits do not distribute profits to owners but use the revenue to fulfill their mission. Adbiyas Global simplifies the entire process of forming a non-profit, ensuring compliance with IRS and state regulations.
A non-profit organization (NPO) also known as a not-for-profit is an entity that does not distribute any excess profits to its shareholders or owners. Instead, the profits are channeled towards achieving the goals set by the organization.
Not for profits are set up for various reasons, usually philanthropic, religious or educational. Some of the more well known are: schools and hospitals, places of worship and museums, fraternities, food and homeless shelters, labor unions and other NGOs. Non profit organizations can only be formed as trust corporations associations.
Setting up your non-profit corporation as a non-profit corporation, rather than a trust or association, will allow you receive all the privileges that come with a for profit corporation. The most important privilege is limited liability protection for the officers, directors, and shareholders of the corporation, which ensures that their bank accounts, houses, and any other personal belongings cannot be used to pay off the debts and liabilities of the non-profit corporation.
The most distinguishing factors of a non-profit corporation in comparison to a for-profit corporation are the exemptions from taxation including State and Federal income tax, and property tax although the exemptions have to be applied for separately. These are some other smaller advantages such as rate reductions from the United States Postal Service.
Nonprofits are unlike business for profits as they do not pay dividends to their members, do not donate to political campaigns, or perform lobbying on behalf of any political party except for some specific situations.
Even after a non-profit is set up, the organization is still bound to certain formalities and timely filings with the IRS. A non-profit corporation is just as required as a business company to follow all corporate rules such as conducting meetings and keeping minutes of the meeting.
Moreover, non-profit corporations are also mandated to maintain a complete record of all activities and transactions pertaining to finances and those not related to finances. Financial data is important, especially data on the support, contributions, grants, sponsorships, and other revenue sources to determine the private foundation status of the organization.
Every non-profit organization claiming a Section 501(c)(3) exemption is required to submit an information return annually in the form of Form 990 or Form 990-EZ or Form 990-PF or Form N-990. Each state also has different requirements for non profit corporations. It is always a good idea to talk to an accountant about these filings. Lastly, all 501(c)(3) non profits, regardless of their employee status are mandated to have a Federal Tax ID (EIN) number.
Establishing a nonprofit organization requires diligence and planning as it is a multi-step process.
Applying for Federal Tax Exemptions The formation of the non-profit entity allows you to proceed with the application for tax-exempt status on a federal scale. The majority of non-profit corporations default to Section 501(c)(3) of the Internal Revenue Code to obtain federal tax exemption which is why a majority of non-profit organizations call themselves 501(c)(3) companies. This application is often best suited for someone with considerable experience as it is long, complex, and multifaceted. Once tax exemption status is granted by the Internal Revenue Service, only one step remains.
Applying for State Tax Exemptions The only requirement that remains is to acquire the tax-exempt certificate at the state level in which the corporation exists. While some states will automatically allocate this status within the formation documents of the non-profit and the 501(c)(3) status, others will require you to submit a separate application to receive this status.
Typically, it takes 2-4 weeks, depending on the state and IRS processing times.
It allows non-profits to be exempt from federal income taxes and receive tax-deductible donations.
Yes, a non-profit can pay employees, but profits must be reinvested into the organization’s mission.
Tax exemptions, limited liability protection, grant eligibility, and public trust.
Yes, most states require a minimum of three board members to oversee the organization.
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