|
|||||||||||
|
Managing a Nonprofit Nonprofit Management incorporates the same
activities as for-profit organizations: planning, organizing, leading,
managing, and coordinating of resources. A nonprofit corporation is
formed for the purpose of serving a public or societal benefit other
than the accumulation of wealth. Typically a nonprofit organization is
engaged in service, philanthropic or voluntarism activities. What is a Nonprofit Corporation? In a nutshell, a Nonprofit corporation is an organization formed for the purpose of serving a purpose of public or mutual benefit other than the pursuit or accumulation of profits. It is important to know what a nonprofit corporation is not. A nonprofit is not a way for ordinary businesses -- or people -- to shield assets or avoid paying income tax. It is not an alternative business form for any regular type of business. Congress and the Internal revenue service have determined that only specific types of organizations can qualify to be nonprofit, or tax exempt organizations. ("Tax exempt is the term used for nonprofit by the IRS and most other government agencies.) Nonprofits are recognized and authorized by Congress (as well as state legislatures), which determined that certain types of enterprises should be free from the burden of having to pay income taxes. It also decreed that society should support and foster many such organizations. In order to accomplish these goals, it established a class of entity now known as a tax-exempt corporation, or nonprofit corporations. In giving these corporations tax-exempt status, however, Congress imposed specific requirements and limitations on their activities. The IRS tends to strictly enforce these rules. Failure to "play by the rules" can result in the corporation losing its tax-exempt status. These limitations on nonprofit corporation activities and operations are what give them unique needs that often are not well met by service providers to for-profit businesses. However, a nonprofit corporation is not prohibited from making a profit, but there are limitations on what it can do with its "profits." There also are limitations on how it can make money. For example, if a nonprofit corporation engages in profit-making activities unrelated to its recognized nonprofit purpose, it must set up a separate corporation to engage in that activity or risk losing its nonprofit, or tax exempt, status. There are any number of reasons that an entity might wish to
organize as a nonprofit corporation. For some nonprofits it may be to
attract donations that are tax deductible to the donors. Many grant
making organizations will only grant money to nonprofit corporations.
Other groups may form a nonprofit corporation to take advantage of an
applicable exemption from paying income taxes as afforded by the
Internal Revenue Code. Indeed, the IRC (as tax lawyers and accountants
like to refer to it) lists more than two dozen general types of
recognized nonprofit corporations. The types of nonprofit corporations with which most of us are
familiar are religious organizations and so-called public benefit
corporations. Public benefit corporations are those that serve a
scientific, literary, education, artistic or charitable purpose that
benefits the public. In the nonprofit world these are known as
"501(c)(3)'s." This number refers to the section of the Internal
Revenue Code under which public benefit corporations may be organized. Using 501(c)(3)'s as our example, we will briefly explore the unique conditions and needs of nonprofit corporation. For example, most public benefit corporations survive on a combination of donated or granted income, donated facilities and equipment, and low paid or volunteer staffs. In other words, their base activities do not generate sufficient income to meet their financial needs. Frequently they are struggling just to survive. The Internal Revenue Code allows for tax-exempt status for many types of organizations, which operate for various nonprofit purposes. Generally, no part of the net earnings of such organizations may inure to the benefit of any private individual or shareholders or the organization. Types of Tax Exempt Organizations The following list is exhaustive, but does not discuss any of the limitations upon the activities of such organizations, which in many cases are considerable. Also, some organizations of the types listed may not qualify for non-exempt status for various reasons specified in the Internal Revenue Code or regulations, or common law as determined by the Courts. The Nonprofit Resource Center strongly suggests that, if you are considering forming a tax-exempt organization, you consult with an attorney familiar with the law of nonprofit and tax exempt organizations. · Certain corporations organized under an Act of
Congress Nonprofit web sites http://www.nonprofitexpert.com/nonprofit_law.htm
|
|
||||||||||
