| The term "nonprofit" is used to identify any business | | | | to end up for personal gain of the founders and will |
| that is organized to serve a public purpose. That is, a | | | | continue to exist on its own merit. |
| for-profit business sets a purpose of making money | | | | Uniform Set of Rules |
| for the owners, where a nonprofit business sets a | | | | Corporations are governed by a uniform, though |
| purpose of some charitable idea. | | | | flexible, set of rules established by state law. Thus, |
| Not all nonprofits need to be organized as a | | | | corporations are operated functionally the same and |
| corporation. For example, social groups or | | | | others (board members, staff, donors) know what to |
| activity-based groups (quilt guilds, hunting clubs) may | | | | expect from the governance of the nonprofit. |
| have no need for tax exemption or charitable status, | | | | Tax Exemption |
| so a basic state registration of the name may | | | | Incorporation allows a nonprofit to apply for state and |
| sufficient. However, there are significant benefits to | | | | federal tax-exempt status. This means that the money |
| incorporating a nonprofit, and any nonprofit that intends | | | | the nonprofit brings in will generally be untaxable. If the |
| to grow or have significant cash flow through should | | | | nonprofit makes money from an activity unrelated to |
| consider taking the extra step to incorporating from | | | | the stated purpose of the organization, it may be |
| the start. | | | | taxable, but general donations, grant funding, and other |
| The benefits of incorporating a nonprofit are akin to | | | | income directly related to the stated purpose is |
| the benefits of LLC or corporation status of for-profit | | | | exempt from taxes. |
| businesses. These benefits include: | | | | Charitable Status |
| Limited Liability | | | | Incorporation also allows qualified nonprofits to apply |
| Except for rare, specific instances, the individuals who | | | | for 501(c)(3) status, meaning donors can write their |
| control a corporation are not liable for legal and | | | | contributions off their taxes. This status is critical if a |
| financial obligations of the nonprofit. The corporation | | | | significant proportion of your income will come from |
| can incur debts and have legal obligations on its own, | | | | the public or individual donors. |
| without the personal guaranty of its board members. | | | | Most nonprofit organizations will benefit from |
| Also, a corporation can own its own property, have its | | | | registering as a corporation. In addition to the legal |
| own bank account, and employ staff, all under its own | | | | protections, incorporation adds an air of legitimacy to |
| name. | | | | the organization. And, while securing 501(c)(3) status |
| Continuity | | | | can be tedious, it is well worth the effort for any |
| A corporation continues to exist in perpetuity until legal | | | | qualified charitable organization that will seek public |
| dissolution, unless it is chartered for only a specific, | | | | funding. Also, most government and private |
| limited period of time. Its existence is not dependent on | | | | grantmaking agencies prefer to deal with 501(c)(3) |
| the individuals involved. For this reason, some | | | | status organizations. If your nonprofit idea is likely to |
| businesses, banks, and donors are more likely to deal | | | | grow or branch out from where it starts, incorporating |
| with nonprofit corporations over unincorporated | | | | the business and pursuing the appropriate exempt and |
| organizations...it indicates that the nonprofit is not going | | | | charitable statuses should begin as early as possible. |