Non-Profit Business Incorporation and Tax Advantage

Posted on Tuesday 7 July 2009

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.




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How a Non-Profit Incorporation Forms LLC

Posted on Monday 13 April 2009

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.




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