Nonprofit Incorporation and Tax Advantage

Corporations involved in areas like education, scientific research, religion, or charity can apply for a special type of nonprofit business incorporation. Such incorporation provides limited liability to the members of management. Forming a nonprofit company helps in its legal protection to safeguard the personal savings and 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).

Image by John Whitworth Photography. Some rights reserved.
Image by John Whitworth Photography. Some rights reserved.

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.

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.

Let Click&Inc help your nonprofit organization take advantage of these tax benefits with our Small Business Tax Package!

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