A non-profit corporation is a corporation whose principal purpose is public benefit and not for producing a profit. A non-profit corporation may not distribute income to benefit its officers and/or directors. More importantly, a non-profit corporation is not an ordinary business and should not be used as an alternative form for a business with the primary purpose of generating a profit.
Yes, a non-profit corporation may generate a profit. Non-profit does not literally mean that a corporation cannot make a profit. A non-profit corporation can acquire more income that it spends on its exempt purpose. This profit can be utilized for operating expenses, including salaries. However, a non-profit corporation may not utilize its income to profit any director or officer.
You must incorporate the non-profit organization in your particular state, which consists of filing your organization’s articles of incorporation with the state. It is important that your organizing documents contain the required language and specific clauses, such as a detailed exempt purpose statement, to ensure that your non-profit will meet the requirements to qualify for Federal 501(c)(3) tax-exempt status. If you choose to incorporate your non-profit through surefilings, you only need to complete the online order form. surefilings will prepare and file your organizing documents.
You should choose a name that represents the purpose of your non-profit corporation. If you incorporate through surefilings, we will request a first and second name choice for your non-profit and complete a name availability search to assure that your name is available and not deceptively similar to any other legal entity. Further, you must choose a name that clearly indicates that your non-profit is incorporated, by including the words "Corporation", "Incorporated", "Corp.", or "Inc." in your name.
You are not required to form your non-profit in the state where it will be physically located. However, practical matters in choosing a location to incorporate should be taken into consideration, such as the state fees and the taxation laws governing that state. If your non-profit corporation will have only a few officers or directors and most of the activities will take place in one state, it is advisable to incorporate in that state. The disadvantages of not incorporating in your home state include the requirement of having to qualify to do business in a foreign state, being subjected to taxes in both your state of incorporation and the state in which you conduct business, and being susceptible to a law suit in your state of incorporation as well as the state in which you conduct business.
Yes, a non-profit corporation may pay a reasonable salary to its officers, directors and/or employees for services rendered to the non-profit corporation and associated to its exempt purpose.
The majority of states require non-profit corporations to have a minimum of three directors. However, some states allow for less than three directors. A small number of states require only one director.
Absolutely not. Being formed as a non-profit corporation does not automatically mean that the corporation is tax-exempt for federal and, in some instances, state income tax. A "tax-exempt" corporation is a distinctive entity that has gained an exemption from income tax liability. A non-profit corporation is not eligible for exemption from income tax liability until it applies for and has been approved by the IRS for tax-exempt status.
Once you receive the filed Articles of Incorporation, which signifies the formation of the corporation by your state, your corporation will need to hold an organizational meeting of the initial shareholders and directors. At this meeting the directors will typically adopt corporate bylaws, distribute corporation stock to initial shareholders, and appoint corporate officers. Also, in most states, directors must meet at least once a year, as directors typically must be elected (or reelected) each year. At the annual meeting the board members accept their election to the board, and transact any other necessary business. The date, time, and location of the annual meeting is typically specified in the bylaws. Written notification of the annual meetings is not usually required, but it is probably a good idea. Other regular meetings may be held as spelled out in the bylaws. Special meetings may be called, and it is typically required that directors receive written notice of the date, place, and purpose all special meetings of directors.
NOTE: It is important to observe these formalities and take corporate minutes of the required meetings. Failure to follow these formalities and properly document your meetings (i.e. keeping minutes) can place your corporate status in jeopardy. The necessary record keeping material, sample bylaws, and stock certificates are included in the Customized Corporate Kit provided by surefilings.