Improving communities and changing lives

A nonprofit, or non-profit corporation, is a company or organization formed for purposes other than making a profit. Like standard for-profit corporations, nonprofits provide limited liability protection. The personal assets of directors and officers typically cannot be used to satisfy the debts or liabilities of the nonprofit. To start a non-profit organization, non-profit Articles of Incorporation must be filed with the state and applicable state filing fees paid. 

Advantages of a nonprofit corporation

Nonprofit corporations typically offer certain benefits:

  • Limited liability protection. Directors and officers are typically not personally responsible for the nonprofit’s debts and liabilities.
  • Tax-exempt status. Nonprofits can apply for both federal and state tax-exempt status.
  • Access to grants. Some nonprofits are eligible to receive public and private grants, making it easier to get operating capital.
  • Tax-deductible donations. With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible.

Forming a tax-exempt nonprofit corporation?

Tax-exempt non-profits follow state laws that are very different from those of standard corporations — but the business formation process is very similar. In order for your non-profit corporation to become tax-exempt, Form 1023 must be filed with and approved by the IRS. Some states also require a state-level tax-exempt status filing.

Key Benefits

Outside of providing limited liability protection, non-profit incorporation can lend additional credibility to your organization, as others may feel you are “more legitimate” because you have taken the steps to formalize your non-profit with the state.

Understanding Nonprofit Formation

Keep in Mind

Some people think that just by creating a nonprofit corporation, the nonprofit is tax-exempt. That is not the case. Incorporating a nonprofit merely establishes it in the state of formation. To become a tax-exempt nonprofit, you must file for tax-exempt status with the IRS and be approved.

Filing for Tax-Exempt Status for Nonprofits