If you are thinking of starting a non-profit, consider incorporating it. There are many benefits to doing so, and since non-profits act differently from for-profit companies, it may even be a necessary step for your organization.
Here’s what you need to know about incorporating your non-profit.
It’s perfectly acceptable to make income for your non-profit. You will, of course, need to use it to pay for the expenses you incur to run your organization. But the difference between you and a for-profit company is that you may not need to pay income taxes on profit, as long as it’s associated with your charitable activities.
Not paying taxes can put more money back into your non-profit to help it grow.
Additionally, if you incorporate a business as a non-profit corporation, the charitable contributions people give you can be tax deductible for them. For those looking for a tax break, this is an appealing option, and one that will attract more donors for you.
Many non-profits seek out grants or other means of funding, and most of these programs require applicants to be incorporated non-profits. You won’t even qualify for the money if you’re not incorporated. By incorporating your non-profit, you open the doors to more means of funding the causes you’re passionate about.
Just like a for-profit business, becoming a corporation provides protection of your personal assets. In the event your non-profit is sued, your directors and members cannot be held liable…if you are incorporated.
Incorporating as a Non-Profit
Convinced that incorporating is the way to go? Let’s get started. The most typical option is the 501(c)(3): the non-profit corporation with tax-exempt status. There are a few more hoops to jump through with this type of corporation, and certain requirements to meet before you’ll be approved.
First, your organization must be involved with one or more of the following causes:
- Public Safety
Your corporation will not be allowed to pay dividends, and the funds it raises must be used to support its causes. Your organization may not be permitted to perform certain activities, so if you have any questions about what is and isn’t allowed, talk to an IRS representative.
Filing as a Non-Profit Corporation
Parts of this process is similar to the one for a for-profit corporation. Start by filing your non-profit articles of incorporation (or a certificate of incorporation) with your state agency, along with payment of the required fee.
Then you need to file a separate application for 501(c)(3) tax-exempt status with the Internal Revenue Service. This form is more in-depth, and will require more time on your part, so plan to allocate enough time on it. It may take several weeks before your application is reviewed and processed, so make sure you’re not butting up against important deadlines, like applying for grants, while waiting to get your 501(c)(3) status approved.
As a non-profit, you have the opportunity to help people and your mission. Protect your organization and realize tax-saving benefits by incorporating it from the start.
Nellie Akalp is a passionate entrepreneur, small business advocate and mother of four. As CEO of CorpNet, a legal document filing service, Nellie helps entrepreneurs start a business, incorporate, form an LLC or set up Sole Proprietorships (DBAs) for a new or existing business.