Non-profit incorporation
In very simple words a non-profit incorporation is a company incorporated not for profit. This is a corporation that does business for benefit of public without any intention to earn profit and without having shareholders. Non-profit organisations are variously described as associations, societies, clubs and institutions. What they all have in common is that their main object is not profit. They usually have a fluctuating membership. An elected Committee of Management usually controls the day-to-day running of the organisation.
Main difference between a general incorporation and a non-profit incorporation is that this cannot reward excessive profit to any person or dividends to shareholders or investors however; this can pay reasonable salary and expenses of business. Otherwise, in all other respect this type of organisation is almost same as other type of corporations. For example, like other businesses, a non-oprofit organisation needs to have license to run business from appropriate authority. It may tranfer its assets and ownership through sale of assets or sale of shares. Death of the shareholders or directors or officers of a non-profit has no effect on the existence to it. It has perpectual continuance unaffected by death of partners or directors. Rather in case of winding up it needs to follow legal procedure of dissolution or termination.
Advantages of Non Profit Corporations
Non-profit corporations do not pay corporate income tax if they conduct business exclusively for the benefit of the general public. Most states also provide tax benefits if the non-profit is organized and operated exclusively for either a religious, charitable, scientific, public safety, literary, or educational purpose, or for the purpose of fostering international sports or preventing cruelty to children or animals. The Internal Revenue Service must approve the tax-exempt status of all non-profit organizations except churches. Contributions to non-profit organizations are tax deductible. Under Section 501 of the Internal Revenue Code (26 U.S.C.A. § 501), there are many organizations considered non-profit, including credit unions, civic leagues, recreational clubs, fraternal orders and societies, labour, agricultural, and horticultural organizations, small insurance companies, and organizations of past or present members of the armed forces of the United States.
Disadvantages of Non Profit Corporations
Non-profit corporations tend to be more closely scrutinized by the tax authorities due to the benefits they receive.
Non-profit may not contribute to political campaigns or engage in excessive lobby efforts.
The costs and effort of maintaining a non-profit corporation are higher than some other business forms due to legal requirements standard in corporations which are an annual shareholder meeting, corporate minutes and other procedures which must be followed. Also, a non-profit corporation which has an office in a state other the one its incorporated in must register as a foreign corporation in that state. The cost of incorporation, maintaining an agent for service (a person to receive legal documents required by law), registered as a foreign corporation and upkeep of non-profit corporate procedure documents is higher than some other forms of business.
What will it cost to incorporate in USA?
A non-profit organization must pay a one-time fee of $70 to become incorporated with the Registry
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