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What is a Non-Profit Corporation?

Felicia Dye
Felicia Dye

The purpose of nonprofit organizations is to provide various types of assistance to people in need. When such an organization is a non-profit corporation, there are additional benefits and protection available. The requirements and regulations of a non-profit corporation can vary from one place to another. There are some aspects of such businesses that tend to be similar, however, such as the separation of personnel and company finances and the regulation of handling surplus resources.

Many people do not realize that a non-profit organization can engage in many of the same business activities as other organizations. They can make sales, purchase goods, and hire employees. Being non-profit simply means that surplus resources will be used to further the cause for which the corporation was established. Those resources will not be distributed to owners or others in the organization for the purpose of financial enrichment.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

A non-profit corporation is an entity similar in many ways to a human volunteer. The business has a legally recognized name and documentation regarding its creation, much like a person has a birth certificate. Being a corporation means that the business is recognized by the law as an entity that may possess property, make decisions, and be held liable. This is one of the biggest benefits of incorporating.

When a non-profit organization is incorporated, its operations are not directly connected to any single individual. This means in the event a founding party or a top-ranking official dies or no longer wishes to work for the organization, it can still exist and continue without major hindrance. This also means if the corporation breaks the law or is ordered to pay fines or damages, individuals within the organization are not generally required to personally bear the burden.

Like a human volunteer, a non-profit corporation exists for the good of others. Each non-profit corporation is generally required to describe its overall purpose in a mission statement. These organizations are also required to have bylaws. Corporate bylaws refer to a document that outlines how the non-profit organization will operate and the limitations it recognizes. For example, bylaws for a non-profit organization that operates women’s shelters may state individuals with domestic violence convictions may not work or volunteer for the organization.

In most cases, a non-profit corporation is a tax-exempt organization. Exemption from federal taxes is not automatically granted, however. The organization must file documentation with the Internal Revenue Service (IRS), and this status must be granted. Many non-profit corporations are also tax deductible, which allows individuals or businesses to claim the resources they give to these organizations as charitable donations on their income taxes.

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