Non-profit corporations are chartered to fulfill specific social objectives, which include charitable, educational and religious purposes.  Money collected which is earmarked for the designated social objectives is typically not taxed by the State or Federal Governments.  There are specific filing requirements and care must be given to the keeping of corporate records, as the justification for non-profit status is that the organization is offering a public service, and theoretically reducing the burdens and obligations of the Federal and State governments.  The Federal statute which make this all possible is the Internal Revenue Code Sec. 501(c)(3).  Consequently, non-profit corporations are often-times referred to as 501(c)(3) organizations.

There are many benefits which result from having non-profit status.  As a non-profit, it is possible to raise money from public and private sources such as individuals, and potential donors may find an incentive to donate in allowable tax deductions.  The nonprofit company also protects its officers and members from personal liability issues which could result from the activities of the organization.  If you already have a nonprofit association, it may be wise to consider the option of formal incorporation.

The process involves the filing of Articles of Incorporation.  Once completed, the next step is to file under Internal Revenue Code Section 501(c)(3) — the process will take some time.  The proposed organization must show justification for the special tax treatment being sought.  Just as is the case with the general corporation, as part of the process you must establish By-laws which are essentially the rules of the corporation.  A Board of Directors must be elected and the first meeting held.  Corporate minutes and records must also be kept in the corporate record book.

There are restrictions on the activities of non-profit corporations.  For example, non-profit corporations cannot be used for political purposes or for purposes outside the scope of their charter.  Directors, officers and members should also not benefit financially from the organization.  Examples of non-profit organizations may include churches, community arts centers, orchestras and service organizations.