Fallacies of Non-Profit Incorporation
Posted on Monday 13 April 2009
Non-profit incorporation is created in a similar way as a regular corporation. However, a non-profit incorporation needs to apply for tax exemption with the state in which it is formed as well as for federal tax exemption. To form a non-profit incorporation, you must:
• Choose a name for the corporation which is legally acceptable in the state
• The articles of incorporation need to be filed along with the filing fee
• You should apply for federal as well as state tax exemptions
• You should develop bylaws which provide details on how the corporation will function
• You must have an initial board of directors
• You must file applications for licenses or permits for the running of the corporation in your state as well as local municipality
Fallacies
A lot of fallacies occur when a non-profit incorporation is set up for tax exemption but does not adhere to the rules and regulations set up for them.
1. One fallacy of non-profit incorporation is that it needs to be set up in the state in which it wants to do business. At times this is not followed and incorporation takes place in one state while business is done in another.
2. Another fallacy which is quite common among non-profit incorporations is that they cannot issue any stock or pay dividends and cannot share the profits among the directors.
3. A third common fallacy is that of “Founder’s Syndrome†which occurs when the organization works based on the whims and fancies of the owner (or founder) rather than based on the mission of the organization.
TAGS: Non-Profit Corporation
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