Non-profit charitable corporations are formed for a wide variety of reasons. Non-profit corporations, also called 501(c)(3) corporations, are tax-exempt from income, sales, and property taxes. A designation of a “non-profit” also may allow a corporation to obtain certain private and public grants or qualify for low-cost postage rates. Forming a non-profit company to undertake charitable work will also secure liability protection for the company’s officers and director.
Creating a legal non-profit corporation involves several steps. Hiring an experienced attorney to help you navigate the process is often the quickest and most efficient way to handle the formation of a non-profit corporation.
One of the first steps in forming a non-profit is choosing a name for the corporation. Each non-profit corporation must have its own unique name, different from any other company incorporated within the state. Checking with your state’s corporations office (often located in the Secretary of State’s office) to make sure there is not another corporation with that name should be the first item on your to-do list.
All non-profit corporations should end with a corporate designator such as “Corporation,” “Incorporation,” or “Limited.” Following the selection of the non-profit name, the corporation may apply for a federal tax identification number (FEIN) from the Internal Revenue Service (IRS).
Another important step in forming a non-profit corporation is drafting and filing the corporation’s “Articles of Incorporation.” This document lists basic information about the corporation, such as name and office address, and must include specific language in order for the corporation to obtain its tax-exempt status. The requirements for the Articles of Incorporation vary state by state.
An advantage of a non-profit corporation is its tax-exempt status. In order to qualify for that status, a federal 501(c)(3) tax exemption application must be filed with the IRS. There also is an alternative online application, Form 1023-EZ, titled the Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, that can be used in certain circumstances.
Determining which form to use, and how to complete the lengthy Form 1023 is frequently the most complicated part of forming a non-profit corporation. Often, this requires the assistance of an attorney to determine if you meet the IRS eligibility requirements. Depending on the state of incorporation, there may also be a separate state tax exemptions application.
Forming your non-profit will also require the drafting of by-laws, which will set forth the corporation’s internal governing rules with respect to procedures for meetings, voting processes, and the election of directors and officers. Non-profit directors are responsible for policy and financial decisions and need to be appointed according to your state law.
Under most state laws, non-profits typically have one director. Directors will facilitate board meetings during which minutes need to be recorded and saved.
In order to conduct the business of the non-profit, some non-profit corporations will also need to obtain sales tax permits or zoning permits. In most states, the non-profit must also submit a Charitable Solicitations Registration, prior to soliciting donations.
If you are interested in forming a non-profit corporation or need additional information about non-profits, an experienced Non-Profits lawyer at the MacMain, Connell & Leinhauser can assist you. To schedule a confidential consultation today, call us at 484-318-7106 or contact us online.