Nonprofit Corporations

Overview

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  • A nonprofit corporation is a corporation that is formed and operated for a recognized nonprofit purpose identified by state corporation law and federal and state tax statutes.  These generally fall into public purposes, religious purposes or the advancement of the interests of a limited group of persons sharing a common interest.
  • Nonprofit corporations share many of the attributes of regular for profit business corporations.  They are a separate legal entity providing their directors, officers and members with limited liability. 
  • They may sue or be sued, incur debts and obligations, acquire and hold property, and engage, generally, in any lawful activity. 
  • They may even engage in profit-making activities unrelated to their nonprofit purpose, though the income from such activities is subject to taxation and certain rules.
  • There are no shareholders in a nonprofit corporation and for that reason it is also referred to as a non-stock corporation.
  • There are several types of nonprofit corporations: mutual benefit corporations, public benefit corporations, and religious corporations.
  • A mutual benefit nonprofit corporation is formed primarily for the benefit its members or persons engaging in a particular business or activity, rather than for broader public purposes.  It therefore serves a smaller group of people since its business or activities tend to be of a limited nature, such as a homeowners association, car club, or sports league.
  • Public Benefit Corporations are formed for a public or charitable purpose rather than the more limited purposes of either the mutual benefit of members or the furtherance of religion. Most Public Benefit Corporations are organized for scientific, literary or educational purposes, which benefit the public.
  • Religious Corporations are formed primarily or solely for religious purposes.  They are regulated by the nonprofit religious corporation laws of the states.
  • A Religious Corporation need not be a formal church.  Religious purposes could include any group organized to promote the study or practice of religion. 
  • Nonprofit corporations are not automatically tax-exempt. They are subject to federal income tax as well as state income and franchise taxes unless they qualify for tax-exempt status.  Applications must be filed with the IRS and often with a state to receive tax-exempt status.


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