Non-Profit Corporation

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Forming a Non-Profit Corporation (also known as a Not-for-profit Corporation) provides personal asset protection and formalization of your business structure. Entities must qualify under the U.S. Internal Revenue Code Section 501(c). The IRS will deem an organization eligible.

The Benefits Of a Non-Profit Corporation Include:
  • Protect your personal assets with liability protection
  • Establish a structure in which investors can invest in the business.
  • Provide a public service.
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Why form a Non-Profit Corporation?

Chances are you've considered the key benefits of forming a Non-Profit Corporation (public benefit corporation) :

  • Non-Profit Corporations are typically charity or service organization.
  • They may be organized as a not-for-profit corporation or as a trust, a cooperative, or they exist informally. A very similar type of organization termed a supporting organization operates like a foundation, but they are more complicated to administer, hold more favorable tax status and are restricted in the public charities they support.

What happens when you file a Non-Profit Corporation? Non-Profit Corporations are formed by filing Articles of Incorporation in the state in which the business will operate. The act of incorporating creates a legal entity. The organization is then treated as a corporation by law and can enter into business dealings, form contracts, and own property like any other corporation. Once the Articles of Incorporation are filed, the Non-Profit Corporation must then undertake the proper filings with the IRS to qualify for tax-exempt status.

In summary, a Non-profit Corporation (or Not-For-Profit Corporation) has the following benefits:

  • A Non-Profit Corporation provides liability protection. Separation of business and personal assets of the owners is critical. A Non-Profit Corporation provides for the separation of these assets while serving as a public purpose.
  • The Non-Profit Corporation creates the legal framework for business to offer services for the general good. Forming a nonprofit corporation is much like creating a regular corporation, except that Non-profit Corporations must take the extra steps of applying for tax-exempt status with the IRS and their state tax division.
  • If the business qualifies for tax exempt status, the Non-Profit Corporation will not have to pay tax on certain income. Non-Profit Corporations must still pay employment taxes, but in some states may be exempt from paying sales tax. Non-profits may also have to pay 'unrelated business income taxes' if the income is not substantially related to the charitable purpose.

When you decide to incorporate your business, there are four different business entities to choose from: C-Corporation, S-Corporation, Non-Profit Corporation, or Professional Corporation . Read more or compare business entities in our Comparison Chart.

What sets a corporation apart from all other types of businesses is that a corporation is an independent legal and tax entity, separate from the people who own, control and manage it. Because of this separate status, the owners of a corporation don't use their personal tax returns to pay tax on corporate profits—the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

If you would like to learn more, visit our Learning Center or Comparison Chart.

An S-Corporation is a regular corporation that has elected S-Corporation tax status. Forming an S-Corporation lets you enjoy the limited liability of a corporate shareholder but pay income taxes as if you were a sole proprietor or a partner. In an S-Corporation, all business profits "pass through" to the owners, who report them on their personal tax returns. The S-Corporation itself does not pay any income tax. Therefore, an S-Corporation elects not to be taxed as a corporation. After the corporation has been formed, it may elect S-Corporation status by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well). Read more about electing S-Corporation status.

State laws distinguish between for-profit (stock) corporations and non-profit (non-stock) corporations. A non-profit corporation often involves an organization whose primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes. Examples of non-profit types might relate to the arts, charities, education, politics, religion, research, sports or some other endeavor. Under the Federal Tax Code Section 501(c), a tax-exempt corporation cannot pay dividends and, upon dissolution, must distribute its remaining assets to another nonprofit group.
Read more about Non-Profit Corporations.

A benefit corporation is a corporation organized under a state's general corporation law that has elected to become subject to benefit corporation statutory provisions. Most benefit corporation statutes require that the entity "shall have the purpose of creating a general public benefit," meaning it must create a "material positive impact on society." In many states this general public benefit purpose is in addition to, and may be a limitation on, any specific purpose set forth in its articles. The benefit corporation was created to provide an option for entrepreneurs who want to voluntarily adopt higher standards of corporate purpose, transparency, and accountability. The entity provides a way to legally cement a social or environmental mission into a company's corporate and legal structure.

The provisions of general corporation law apply to benefit corporations except where those provisions are in conflict with or inconsistent with the benefit corporation provisions. Therefore, like a traditional for-profit corporation, a benefit corporation is an independent legal and tax entity, separate from the people who own, control and manage it. Because of this separate status, the owners of a benefit corporation don't use their personal tax returns to pay tax on corporate profits-the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

If your corporation will be engaging in what your state might call "Professional Services," the Articles of Incorporation must bear special language and the corporation must be formed pursuant to certain statutory provisions.

"Professional Services" according to most states usually consists of the following activities:

  • Medical Services
  • Legal Services and Representation
  • Accounting and Financial Services
  • Architectural Services
  • Other services may be included in this list depending on your selected state of incorporation

It is important to note that most states vary in their requirements regarding licensing of professional activities, therefore, we encourage you to seek the advice of an attorney if you fall within the "Professional Services" statute of your state.

Read more about Professional Corporations.

Our applications allow you to name up to four officers for your corporation when you file with us. Most states allow businesses to authorize one person to serve in the three mandatory positions:

  • President
  • Treasurer
  • Secretary or Clerk

This person's responsibility and authority changes for each position.

The President The President has the overall executive responsibility for the management of the corporation and is directly responsible for carrying out the orders of the board of directors. He or she is usually elected by the board of directors.

The Treasurer The Treasurer is the chief financial officer of the corporation and is responsible for controlling and recording its finances and maintaining corporate bank accounts. Actual fiscal policy of the corporation may rest with the Board of Directors and be largely controlled by the President on a day-to-day basis.

The Secretary The Secretary is typically responsible for maintaining the corporate records. In addition to these required officer positions, a corporation may also have vice presidents and/or assistant secretaries or assistant treasurers.

The purpose of a Registered Agent is to provide a physical address for your business so that it can accept official documents on behalf of your corporation (tax notices, annual reports, legal-process documents such as a summons, etc.).

The primary benefit of this service is that it provides a layer of privacy between you and the public. As the Registered Agent's name and address is one of public record, generally the Registered Agent's legal address will be the one listed in all official public documents.

Penalties for not maintaining a Registered Agent may include fines or revocation of business's corporate legal status. Please note that post office boxes are not allowed.

Learn more in "Registered Agent Services".

To keep your business legally viable, there are a number of steps you may need to follow after you incorporate your business. For example, you may need to file an Article of Amendment if you need to make changes to your company. You also may need to issue stock or file an Annual Report, which is a requirement in most states. Our business filing experts can help you process necessary changes to your business.

Learn more on how to maintain your corporation

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