A not-for-profit corporation is a company specifically formed for purposes other than operating a profit-seeking business, such as for a charitable, religious, educational, or scientific purpose. There is, however, a mistaken belief that all “non-profits” cannot make money. It can, either from its own charitable activities or from ways unrelated to the non-profit purposes.
For purposes of incorporating, setting up a non-profit is similar to setting up a regular for-profit corporation and enjoys some of the same common features, including separate legal entity status and limited liability protection. The not-for-profit corporation is distinctive in two ways. First, the corporation cannot be organized for any person’s private gain. Secondly, should it dissolve its assets, the corporation must distribute to a similar tax-exempt nonprofit group.
The mere fact that a corporation is organized as a not-for-profit corporation that does NOT necessarily mean that contributions to it are tax-deductible. For donations to be “tax deductible” the charity must file an “Application for Recognition of Exemption” on IRS Form 1023. The Internal Revenue Service must approve the application pursuant to Internal Revenue Code Sec. 501(c)(3).
If you do not know the type of company you want to form, click here for important information about types of companies and about federal tax considerations before proceeding.