Archive for the ‘Nonprofit Incorporation Law’ Category

Non-Profit Business Incorporation and Tax Advantage

Corporations involved in areas like education, scientific research, religion or charity can apply for nonprofit business incorporation. Such incorporation provides limited liability to the members of management. Incorporating a nonprofit company helps in its legal protection to safeguard the personal savings as well as assets from the activities of the corporation. Most forms of nonprofit business incorporation take the benefit of 501(c)(3) tax-exempt status with the Internal Revenue Service (IRS).

Nonprofit corporations that get 501(c)(3) tax exempt status have the following benefits:

• The directors, officers as well as members have complete personal asset protection as well as limited liability
• Tax exemption from federal income tax
• The incorporation is eligible for grants from private and pubic bodies
• The donations offered to these nonprofit incorporations are tax deductible
• They have perpetual existence which means that if the director or owner decides to leave the corporation or passes away, the business still continues to exist
• Property taxes exemption

The main reason for setting up a nonprofit corporation is to get funds from various government agencies as well as from private organizations. Though it enjoys tax-exempt status as well as personal liability protection, it has its own legal and taxation procedures. It is very important to find out all taxation details prior to setting up a non-profit corporation. As non-profit corporations are business organizations involved in public service, they need to follow special rules. Unlike a for-profit business in which the profit is distributed among owners and shareholders, with a nonprofit setup all the profit remains within the corporation.

How a Non-Profit Incorporation Forms LLC

A non-profit incorporation is formed based on different state laws and is established for purposes other than to make profits. It can be formed for various reasons like religious, charitable, education or as a research-oriented organization. These organizations can apply for tax-exemption at both the federal and state level. If a non-profit incorporation has been offered tax-exemption under 501(c) (3) of the Tax Code, it need not pay federal corporate income taxes which results in saving a huge amount of money.

Forming an LLC

A non-profit incorporation which has received 501(c) (3) eligibility can receive a grant from both public as well as private organizations. They also receive similar LLC or limited liability protection as is received by for-profit organizations. When a non-profit forms LLC, its directors or trustees, officers and members are not directly responsible for its debts and liabilities. The non-profit incorporation cannot function to generate profits for the owners and it should adhere to the norms of the IRS regulations.

Excellent Alternative

A non-profit incorporation forming an LLC is an excellent alternative to the regular way of running a business. In an LLC, the state laws take care of its formation and they follow federal tax regulations. It is much simpler to form an LLC with exemption from tax for non-profit incorporation. As soon as the decision is taken that the business will be formed as a non-profit incorporation, you should review the advantages of forming an LLC against that of forming a regular corporation.

Maine Non-profit Filing and Fees

After conducting your research of the needs of your location and deciding on the type of non-profit organization you want to form, the next step is beginning the filing process. This process involves providing the secretary of state with requested information that must convince them that your operation qualifies as a non-profit organization. This process requires a few simple steps, each of which attracts its own processing fee. The fees for each state differ slightly so we will analyze the fees charged in the state of Maine during 2009.

Name
A name defines a corporation. The name chosen for the organization must be unique and in no way depict that of another organization. It must end with the word Limited, Corporation, Incorporated or an abbreviation of one of these words. This name will also be crossed referenced with the state records to prevent duplication. The fee associated with the name search and registration is $5 each. If you wish to carry out activities under this name prior to approval and additional fee of $25 is required.

Filing Paper work
To qualify as a nonprofit organization, one must file for the article of incorporation. This involves completing various forms requesting information of the organization. A total value for all the fees involves cost an average of $100.

Once you have completed the filing process, you then register the nonprofit organization with the IRS and state board to solidify your status. Nonprofit organizations, like any other business require an Employer Identification Number (EIN), which the IRS uses to track the financial movements of the organization. The EIN also uses this number as cross-reference to certify donations made to the organization.

Registering with the IRS may qualify you for the tax exemption status. Registering with the state board gives the organization permission to solicit funding from both public and private sources.