Starting a Non-Profit Corporation

State Filing

Filing for nonprofit status in a state is the first step of the
process for becoming a tax-exempt organization. This requires a Certificate or Articles of Incorporation. The Incorporation documents must detail the charitable or other non-profit purpose. The Certificate of Incorporation must also have language restriction the use of the assets for non-profit purposes.

Members

Some organizations, such as religious organizations and research
organizations, have "members", but  nonprofit corporations do  not have shareholders.(Many times do-it-your-selfers buy pre-made corporate  record books. If you have a corporate book with stock certificates the wrong corporate minute book was purchased! See your attorney right away!)

IRS Filing

Form 1023 is supposed to be filed within the first 27 months of
incorporation. The IRS will accept a late filed Form 1023 and, if requested  may allow the exemption, when granted, to be retroactive.

What is the Tax Treatment for Donations Prior to IRS Approval?

If the IRS Determination Letter denies tax exempt status to the corporation, donations are taxable income.  The "donors" are not entitled to a charitable income tax deduction. If the IRS grants non-profit status, it is retroactive to the date of incorporation. The donations and income from the earnings earned  are exempt from taxation and the donors are entitled to the charitable income tax deduction permitted under IRC §170.

Who Runs the Non-Profit Corporation?

A nonprofit corporation has a Board of Trustees which has a similar function as a for-profit corporation Board of Directors. The election of  officers and trustees of a nonprofit  corporation is very different than for-profit shareholders electing directors, who then elect officers. In a nonprofit, a nominating committee usually is appointed by the president and/or trustees, who then select successor officers and trustees.

What Corporate Documents are Needed?

The not for profit corporation  must adopt appropriate Bylaws.Non-profit corporation ByLaws are very different from Bylaws of  a for-profit corporation. 

Ronald J. Cappuccio, J.D., LL.M.(Tax)
Counsellor at Law
1800 Chapel Avenue West
Suite 128
Cherry Hill, NJ 08002
856-665-2121