Do you have a charity business plan to help society with an organization? If you are about to start an organization that would be involved principally in a charitable, religious, scientific and educational endeavors, you would need to register this as a Non-Profitable Corporation. This is a great way to give back to the community and helping those in need through your Non-Profit Corporation. However, this process involves a few steps which you should be aware of before moving forward.
The reasons and method of registering your organization with the help of a Non-Profit Registered Agent have been explained below in details.
Types of Nonprofits
An organization that is a Non-Profit Corporation has the goal of offering the society some kind of community or public benefit. These corporations do not have any intention of gaining a profit from the organization. There are a lot of categories that fall under the Non-Profit Corporation as per the IRS (Internal Revenue Service), the Non-Profit Registered Agent can help to set this up. The categories are:
- Veterans Organizations
- Business Leagues
- Labor and Agricultural Organizations
- Social Welfare Organizations
- Charitable or Religious Organizations
If we look at each of the categories, they have different tax requirements and benefits. Though most of the Non-Profit Corporations fall under the IRS Code 501(c)(3) and are known as charitable organizations, it is better for you to analyze what your organization offers and select the right option. You can get the help from our Non-Profit Registered Agent to select the right category for your organization.
A Detailed Explanation of a Non-Profit Corporation
You may already know that the Exempt Organizations, as per the IRS (known as the Non-Profit Corporation) are the ones that were created to achieve objectives which do not comprise of gaining profits, that would be eventually distributed to the owners.
These organizations are subjected to federal and state laws, while they are regulated by a Board of Directors. The only difference here is that they do not have owners like the other normal business organizations. The members of the Non-Profit Corporation are not qualified for a dividend when the organization creates excess income. Also, the members aren’t authorized to have a distribution when the organization gets dissolved or closed.
And in the US, these organizations are formed under the not for profit corporation law of the state in which it is incorporated. This organization is an unincorporated association that consists of about three or more members who have been registered as an LLC, a trust or at the county level. Hence, make sure you are choosing a Registered Agent to help you out with the plan you have, so that you do not make any mistakes while setting up the organization.
What is Section 501(c)(3) & Section 501(c)?
Section 501 is a part of the US tax code, and it describes the kinds of non-profit corporations that are tax exempt. And Section 501(a) of this code provides for the exemption. It states that the corporations are excluded from paying income taxes to the federal government in case they come under the sections 501(d) or 501(c), or even under the section 401(a).
Moving ahead, there are 29 sections in Section 501(c) of the USA tax code that lists the special requirements that the special corporations have to adhere to so that they can be recognized as tax exempt as per the section.
And Section 501(c)(3) permits the Non-Profit Organizations to be tax exempt. Especially those corporations that are private operating foundations, private foundations, or public charities. This section is governed and regulated by the US Department of Treasury via the IRS. There are many other sections for the other types of corporations.
In short, there are two main classes of Non-Profit Corporations:
- Membership or service Non-Profit Corporations established under the subparagraphs of Section 501(c) as per the IRS; and
- Charitable Non-Profit Corporations, as defined under the Section 501(c)(3) of the IRS Code, which is a specific section of the Section 501(c) dedicated to the non-profitable corporations.
Under the section 501(c)(3) and using the Form 1023, Charitable Corporations can request for the tax-exempt status. And if the application of the organization gets accepted by the IRS, any donor of that Non-Profit Corporation can then deduct their contributions when they file their corporate or personal taxes. This action is subjected to the Byzantine rules for charitable deductions.
As per this rule, you are allowed to deduct the charitable contributions of any asset made to qualified organizations. This is only if you are a person who itemizes your deductions. Normally, you would be able to deduct up to 50% of the AGI, which is the adjusted gross income. But 20% and 30% restrictions are applied in a few cases.
You can also take the advice from the Non-Profit Registered Agent to file the Form 1024 for your Non-Profit Corporation to confirm their exempt status. But bear in mind that the contributions that have been made to these organizations would not generally be deductible for the donors.
For a person to build a Non-Profit Corporation, a lot of things are needed as per federal and state laws. They are:
- More than one primary director (there have to be 3 or more directors as per the rules);
- A particular objective clause;
And if the organization is a charitable one, it needs distinctive language governing the administration of corporate affairs, mostly concerning:
- attempting to influence legislation or elections;
- the prohibition against engaging in propaganda, and prohibition of self-dealing; or
- distribution of the assets of the company upon dissolution.
Why Form A 501(c)(3)?
If you have decided that you want to pursue a charitable goal, then you can file the form 501(c)(3) with the help of your Non-Profit Registered Agent. If you are already doing charity work and feel that it is not enough, and you want to give more than just donating your money, it is the right time to open a Non-Profit Corporation.
Also, it is important to know that you do not have to turn into an IRS-recognized Non-Profit Corporation for starting your charity work. Nonetheless, people mostly donate to organizations if their gifts can be deducted on their tax forms. Other than this, if your Non-Profit Corporation gets the 501(c)(3) status, it would be taken and seen as a legitimate organization by potential donors.
But also keep it in mind that the IRS would require most of the company’s operating and the financial data as per the 501(c)(3) code. And this information would be put in the public records so that the organizations can be scrutinized. And if there is any case of fraud, the organization can be held responsible by the donors.
Furthermore, if you incorporate your Non-Profit Corporation, it would help in protecting your personal assets. Although, you can incorporate without turning into a 501(c)(3).
How to form a Non-Profit Corporation?
Building a Non-Profit Corporation with A Non-Profit Registered Agent is almost the same as incorporating a profitable business. Below are the steps involved:
Certificate of Incorporation
Also known as the Articles of Incorporation, this document is not only needed for the registration of a profitable corporation, it is also an essential document for the Non-Profit Corporation. Moreover, each state in the US has their own version of the Certificate of Incorporation, though most of the information required is the same across all the states.
Choose a Name
For starting an organization, regardless of it being a Non-Profit Corporation or a For-Profit Corporation, it needs a name. And most of the states need the name to be accompanied by a corporate identifier, such as “Limited,” “Incorporated,” “Company,” “Corporation,” or an abbreviation like “Corp,” or “LTD.”
You would need to conduct a name availability check before filing, to find out if the name is available or not. Also, it has to be kept in mind that the state is the one that has the right to give the ultimate approval regarding the name of the Non-Profit Corporation. They would check if the name has already been used or is “deceptively similar” to any other one. You can get the help of a Non-Profit Registered Agent for making sure you have the right pieces in place.
Define Your Business Purpose
This is basically an explanation of what your Non-Profit Corporation would provide or do, and it’s crucial to have a proper and detailed description of your business plan. In case you decide to register for the tax-exempt status, you would need to give the IRS the copy of the Certificate of Incorporation. They would also pay a lot of attention to the business purpose which classifies the business.
The 501(c)(3) Non-Profit Corporation is the most common type. It is usually a private foundation that was built with the objectives for the prevention of cruelty to children and animals, fostering of international or national amateur sports, testing for public safety, literary, scientific, charitable, educational, or religious. The Non-Profit Corporation can also be a public charity.
The above-mentioned organization purposes fall under 501(c)(3) corporations since they are built for the objectives described in Section 501(c)(3) of the IRS Code. Moreover, there is the 501(c)(4) through 501(c)(27) corporations. And to know more about them, you can connect with your Non-Profit Registered Agent to assist you in the details.
Choose a Registered Agent
Every state has an obligation that the Non-Profit Corporation should have a Non-Profit Registered Agent with them during the formation. The reason is since the Non-Profit Registered Agent are liable for getting the tax and legal documents. Moreover, these Non-Profit Registered Agent needs to be available during normal business hours and need to have a physical address present in the state of incorporation.
Furthermore, it must be noted that the address of the Non-Profit Registered Agent would be in the public records. And for the states that do not need the address of the agents in the formation of the documents, it would be the only address that would be on file for the corporation.
Select the Officers, Directors, and Incorporator
- Officers. An officer is liable for the Non-Profit Corporation’s day-to-day activities. Even though some of the states do not require the official information, some states have made it a requirement. The officers titles commonly in this kind of corporations are Treasurer, Secretary, Vice President, and President.
- Directors. A Director is a person who is liable for directing and supervising the operations of the Non-Profit Corporation. This also includes the decision making of the organization. Almost all the states would need the names and addresses of the directors in the documents of formation.
- Incorporator. This is either a company or a person. They can also be the same one as the Non-Profit Registered Agent who is responsible for preparing and filing the documents of incorporation with the state, such as IncParadise. Almost all the states need the address, signature, and name of the incorporator on the formation documents.
Even though this is not the complete list of things to consider, it outlines the main points that are needed by the IRS when applying to register the Non-Profit Corporation with the help of the Non-Profit Registered Agent. You should keep in mind that filing for the Certificate of Incorporation with the IRS does not mean that you get the tax-exempt status for your Non-Profit Corporation.
For you to obtain the tax-exempt status, you would need to file the Form 1023 with the IRS. A few states also have a state tax-exempt status procedure that would need the assistance of the Non-Profit Registered Agent.
Hence it is better to connect with an agent or a company that offers the service so that the entire process moves smoothly after you are determined to move ahead with the charity idea. Contact IncParadise to get the best assistance while you incorporate your Non-Profit Corporation!