Operating a Nonprofit Corporation

Operating a Nonprofit Corporation

Below are some of the most common issues relating to the operation of a nonprofit corporation:

1. Keep corporate affairs separate from personal affairs

It's important to keep the affairs of your nonprofit corporation separate from the personal affairs of the directors and officers. This means setting up a separate bank account, maintaining separate records and keeping separate books for accounting purposes.

Carry out all corporate meetings as required Like a regular corporation, a nonprofit corporation's directors need to hold periodic meetings. Meetings can take place in person or on the phone. Either way, keep a written record of the items discussed and actions approved. Alternatively, you can get all the directors (or a majority of the stockholders) to sign a statement approving corporate actions.

2. Process all nonprofit tax forms and licenses in a timely manner

Even if your nonprofit corporation is exempt from federal and state income taxes your nonprofit still may be required to file an information tax return. Federal income is reported on IRS Form 990 and must be filed by April 15 if your corporation's fiscal year ends on December 31. If you operate certain public charities where your gross receipts are less than $25,000 per year, you may be exempt from filing a return. The IRS will inform you if you qualify for this exemption.

3. Obtain your nonprofit's Employer Identification Number (EIN) and licenses

Every nonprofit corporation must obtain a federal tax identification number, which is somewhat analogous to an individual's Social Security Number. Some states also require a separate state tax ID number. In addition, county and city business licenses may be required. Please check with your city and county to see if you need any licenses.

  • Definition of a Nonprofit Corporation
    A Nonprofit corporation is a special type of corporation that has been organized to meet specific tax-exempt purposes. To qualify for Nonprofit status, your corporation must be formed to benefit: (1) the public, (2) a specific group of individuals, or (3) the membership of the Nonprofit. Examples...
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  • Reasons to Form a Nonprofit Corporation
    As someone involved with a charitable cause, you might be weighing the benefits of formally organizing your nonprofit. While it might take a little extra work, only with a state-recognized nonprofit corporation can you obtain private and public grants, low-cost postage rates and be exempt from...
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  • Comparing a Nonprofit to an LLC or Corporation
    Nonprofit corporations enjoy the same liability protection as regular corporations and limited liability companies. In other words, your directors, trustees, members, and employees are not generally responsible for corporate debts and liabilities. There are also significant federal and state tax...
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  • Tax Exemption for Nonprofits
    Forming a nonprofit corporation with your state does not automatically qualify you for federal tax exemption with the IRS. Once you have created your nonprofit by filing the necessary documents with your state, if you want federal tax exemption, you must file a separate application with the IRS....
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  • Commercial Rights of Nonprofits
    The fact that a corporation is a nonprofit does NOT mean the corporation cannot sell goods or services for money. In fact, many nonprofits make money selling everything from clothing to medical services. A nonprofit can pay salaries to officers and employees. But, in order to maintain nonprofit...
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  • Managing a Nonprofit Corporation
    Directors are responsible for the management and operation of a nonprofit corporation. Nonprofit directors can serve with or without compensation. If you decide to compensate directors, remember that compensation must be deemed "reasonable" by the IRS. Directors are under the same constraints of...
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