Not-for-Profit Corporation

A not-for-profit corporation is a company has a public purpose and all income and profit is permanently dedicated to that purpose and may not be shared with private individuals. Not-for-profit corporation cannot have shareholders or investors. It is managed by a board of directors, trustees, and/or employees. Such type of entity is best suited for a businesses organized for charitable, educational, artistic, scientific or religious purpose.

 

Pros:

      Corporation does not pay income tax

      Donations made to a 501(c)(3) not-for-profit corporation are tax deductible for the donor

      Tax deductible fringe benefits, including health insurance and retirement plans

      Sales and property tax exemptions may be available

      Managers liability for business obligations is limited – lawsuits are brought against the company rather than the individuals

Cons:

      Any profit that a not-for-profit corporation earns on the products/services it provides or on the investments it makes must be applied to the operation of the corporation and cannot be distributed to its members, officers, and directors.

      Expensive and difficult to create – requires many additional filing with IRS to obtain a tax exempt status

      Administrative duties may be complex to set up, operate and dismantle the company

      No shareholders. Corporate assets are deemed to be owned by the public (upon dissolution of corporation, its property must be transferred to another not-for-profit corporation or to the state).

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