Americans are famous for volunteering for good causes and for banding together to get things done,whether the goal is wildlife rescue or low-income housing. If you're involved in a fledgling nonprofitorganization, you and the other folks active in the group have probably wondered whether or not youshould incorporate. But it sounds complicated and expensive. Who has the time or money?
Becoming a nonprofit corporation does require some paperwork, and some money -- but for many groups,it's worth it. To form a nonprofit corporation, one of the organization's founders prepares and filesstandard Articles of Incorporation -- a short legal document that lists the name and directors of thenonprofit, plus other basic information. The Articles of Incorporation are filed with the Secretary of State's office for amodest filing fee in the state where the nonprofit has its operations or headquarters.
In addition, your nonprofit will want to apply for and obtain a federal and state nonprofit tax exemption,which frees you from having to pay income taxes on profits made from engaging in your nonprofitactivities, makes you eligible for charitable tax deductible contributions from donors, and qualifies you forlocal real and personal property tax exemptions. It's often best to obtain your state tax exemption beforefiling your Articles of Incorporation with the Secretary of State -- by doing this, you get to file your Articles without making thetax payments that your state requires of nonexempt corporations. For example, in California, if you filenonprofit Articles after getting your state tax exemption, you pay just $30; if you file before you get theexemption, the fee is $830 (you pay the extra $800 required to form a nonexempt corporation).
Here are five circumstances that may make it worth your while to incorporate:
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Related resources at inc.com:
Nonprofit Corporations Can Do Good Works and Make Money, Too
Upstarts: Serving Nonprofits