Nonprofit Corporations

Nonprofit Corporations

It is Not a Company That Doesn’t Show a Profit!

A nonprofit corporation is a separate entity that has tax exempt status from the Internal Revenue Service (IRS) under section 501(c)(3) of the tax code.  That is why they are sometimes referred to as 501(c)(3) charities.

There are many technicalities of California, Federal and Tax law that must be followed in order to receive the many benefits that nonprofit corporations have.  You have to create and maintain the nonprofit corporation within these rules.

There are types of activities and purposes that can be a nonprofit and there are types that can’t.  Not wanting to pay tax is not a charitable reason for having a nonprofit corporation. A regular corporation (both S and C) can be formed for any purpose that is not illegal.  Nonprofit Corporations in California must be one of three purposes and types: a public benefit corporation; a religious corporation; or a mutual benefit corporation.

After creating it with the State of California, the next big step is getting it qualified from the IRS and California as a tax-exempt entity.  This can be very time consuming, but it is worth it in the end.