Non-profit organizations are as diverse as the people they serve. They can be charitable, political, religious, financial, or social. Non-profit corporations are special corporations which are created for tax-exempt status. To qualify for the status of non-profit, the corporation must have been formed with beneficiaries in mind. They may be specific groups, the public, or members from the organization.

Non-profit corporations benefit by having the same type of limited liability status which other corporations and LLCs enjoy. Directors, shareholders, employees etc. are not affected personally by the debts or liabilities of a corporation. There are state and federal tax benefits available to non-profit corporations.

Being a corporation with non-profit status doesn't necessarily qualify you for exemption of state or federal taxes, but it is the beginning of the process. You must be organized according to the validations of non-profit organizations to file for exception from taxes. There are 20+ codes under which your corporation can qualify. The most popular codes, 501(c)(3) and 501(c)(7), pertain to recreational and social organizations.

Non-profit corporations may sell services and goods for money. Lots of non-profit corporations sell a variety of goods and services to raise money for the corporation to operate with. They use these funds to pay officers and employees, but are forbidden to dole out portions of profits to individual members and directors or officers for personal profit.

Tax Exemption 501(c)(3)

This code provides exemption of federal income tax to organizations created for charitable, scientific, religious, educational, or literary functions. Listed among several other tax exemption codes granted by the IRS it appears to be the most popular.

501(c)(3) was formed to encompass the groups below:

• Charities = Groups giving aid to benefit the public.
• Religious = Groups whose staff and organizers who are ineligible for compensation adhere to the mandates set forth by the religion.
• Scientific = Groups involved in research of a scientific nature from which the public can profit.
• Education and Literary = Groups which provide enough facts in such a way as to enable individuals or our public to arrive at independent conclusions.

Non-profit corporations cannot claim federal exempt status until the proper application has been filed with the IRS. When a non-profit corporation's purpose is capable of qualifying according to code 501(c)(3), the Adanas Law Firm has the expertise to assist in the process. The same applies for state tax exemption status.

Your non-profit may not qualify for federal exemption with code 501(c)(3), however it may qualify using one of the other codes listed below.

Popular Codes

• Agriculture and labor groups 501(c)(5)
• Business organizations 501(c)(6)
• Recreational and social groups 501(c)(7)
• Fraternities 501(c)(8)
• Credit Unions 501(c)(14)
• Farmer co-ops 501(c)(16) 521(a)I

IRS requires several months to process your application. Processing times may vary dependent upon the number of cases and duties assigned to the agent responsible for your application. Do not wait for exemption status to form a corporation. Continuously work towards implementing all the foundational networks to create a successful corporation during the time that the Adanas Law Firm is submitting the necessary documentation.

For more information on forming a corporation or LLC for your business or for complete details on other helpful business and personal legal services, please do not hesitate to email us at info@adanaslaw.com, call us toll-free at 877-420-4600, or contact us online. Be sure to request your FREE Informative Newsletter and Business Start Up Check List!