Organizing a Non-Profit Corporation

Organizing a Non-Profit Corporation

Introduction

Helping Hand is a tax-exempt not-for-profit food bank that serves all of Texas. Helping Hand's goal is to alleviate hunger in Texas by soliciting, collecting, growing, and packaging food for distribution through a network of service agencies and programs that serve our target population groups. Our services include food box programs, emergency food programs, and a youth farm that provides opportunities for self-sufficiency activities for "at risk" youth. Helping Hand receives support from the county, charitable helping hands and corporate sponsorship.

Non-profit Basics

Nonprofit (or not-for-profit) corporations work well for all sorts of groups, from artists and musicians to people active in education, health, and community services. Often the reason for obtaining nonprofit status is simple -- it's usually a requirement for obtaining funds from government agencies and private foundations. Obtaining grants, however, is not the only reason to incorporate as a nonprofit.

Non-profit Incorporation

Nonprofit incorporation is very similar to creating a regular corporation except that a nonprofit must take the extra steps of applying for tax-exempt status with the state in which it incorporates and with the IRS.

Forming a nonprofit incorporation is very similar to forming a regular corporation: You must file "articles of incorporation" with the corporations division (usually part of the secretary of state's office) of your state government. But unlike regular corporations, you must also complete federal and state applications for tax exemptions.

After filing this initial paperwork, you will create corporate bylaws, which lay out the operating rules for your nonprofit. Finally, you elect the initial directors of your nonprofit and hold helping hands meeting of the board.

Non-Profit Incorporation Importance

The word "nonprofit" refers to a type of non-profit Incorporation -- one which is organized under rules that forbid the distribution of profits to owners. "Profit" in this context is a relatively technical accounting term, related to but not identical with the notion of a surplus of revenues over expenditures.

Most [registered!] nonprofits non-profit Incorporationes are organized into corporations [or associations!]. Most corporations are formed under the corporations laws of a particular state. Every state has provisions for forming nonprofit corporations; some permit other forms, such as unincorporated associations, trusts, etc., which may operate as nonprofit non-profit Incorporationes on slightly (but sometimes importantly) different terms.

The Internal Revenue Service (IRS) gets involved because corporations are, in general, required to pay federal corporate income taxes on their net earning (another technical term, pointing to a slightly different way to the idea of a surplus of revenue over expenses).

Section 501 of the Internal Revenue Code lists several circumstances under which corporations [or unincorporated nonprofits!] are exempt from these taxes. Section 501(c)(3) -- the famous one -- describes [nonprofit!] (1) serving charitable, religious, scientific or educational purposes (2) no part of the income of which "inures to the benefit of" anyone.

Tax-exempt nonprofit non-profit Incorporations can, and do, operate in all other particulars like any other sort of non-profit Incorporation. They have bank accounts; own productive assets of all kinds; receive income from sales and other forms of ...