A Nonprofit Corporation is a corporate entity that has been formed in order to provide a public good or to do charitable work. Nonprofits may earn money and receive donations, but the organization does not exist for the purposes of earning a profit for its owners. Instead, the nonprofit has an organizational goal of providing help, assistance or enrichment to society or to people’s lives. Because nonprofits benefit the public rather than individual owners, these types of organizations are Tax-Exempt.
Forming a Nonprofit requires taking multiple different legal steps. The organization first must be incorporated and the organization must then apply to the Internal Revenue Service for Tax-Exempt Status. An experienced Scottsdale Arizona nonprofit lawyer at Lotzar Law Firm, P.C. can provide assistance to those wishing to start a nonprofit who are seeking Tax-Exempt Status for their enterprise. Call today to schedule a consultation and learn more.
What is a Nonprofit Corporation?
The first step in forming a Nonprofit Corporation is to request a Tax ID Number, decide on a business name and file Articles of Incorporation with the Arizona Corporation Commission. The name of the organization must not be in use already within the state of Arizona. All requirements must be met in filing the Articles of Incorporation including providing information on the name of the nonprofit; the address; the officers; and the organization’s purpose.
After the Nonprofit Corporation has been created as an official legal entity, it is necessary to request Tax-Exempt Status from the Internal Revenue Service. There are different categories under which organizations become Tax-Exempt Nonprofit Corporations. For example, a Nonprofit Corporation may be classified as a 501(c)(3) Organization. This means that section 501(c)(3) of the IRS Code is the section of the law that entitles this particular business to avoid paying taxes. Form 1023 must be submitted to the IRS, along with information on why the Nonprofit Organization should be considered Tax-Exempt, in order to obtain approval.
The IRS will allow an organization to be classified as Tax-Exempt only if the purpose is to do something beneficial to the public good. For example, a Nonprofit Corporation may be Tax-Exempt if its purpose is:
- To do charitable work.
- To provide educational services for a literary purpose or for a scientific purpose.
- To operate in service of a religious organization.
Forming a nonprofit organization not only allows for favorable tax treatment for the organization, but also for donors as well. In most cases, donors who give money to a 501(c)(3) or other similar Tax-Exempt Organizations will be able to take a tax deduction for the amount of the donation.
The owners and directors of a nonprofit also benefit from liability protections when an organization is structured as a nonprofit corporation. This means those in charge of running the organization will not be at risk of personal liability for debts or Judgments against the Nonprofit Corporation.
Lotzar Law Firm, P.C. can assist in the formation of a Nonprofit Corporation so you can start taking advantage of the legal benefits of this organizational structure. Call today to schedule a consultation and learn more.
To learn more, please download our free nonprofit corporation in Arizona report here.
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