Nonprofit 501(c)(3) Corporation Formation

Nonprofit corporations play an enormous part in our society.  Traditionally, they fill the gap between the government's provision and society's need.  In providing such a valuable service to the community, nonprofit corporations may operate free from income tax.  There are many types of nonprofit corporations.  The most common type of nonprofit corporation is exempt under Section 501(c)(3) of the Internal Revenue Code.  501(c)(3) nonprofits are the most common because they provide for the broadest range of permissible activities, and they provide the greatest tax benefit to donors.

Forming a nonprofit corporation allows the directors and officers of the corporation to offer a service or a program to the community, or to a group of people without paying taxes on the money that it receives.  Additionally, tax-exempt status makes it very easy to receive cash and in-kind sponsorships, grants, and donations because of three main reasons:
 

• the sponsorship programs of the major corporations; 
• the need for the government to have an organization that offers a particular service; and 
• the tax deductions available to the donors. 

You can use those grants, and other donations, to operate a special program that the community needs.  The recent trend is for employees that have been downsized, or are otherwise out of work, to create their own employment opportunities by forming a nonprofit corporation.  The nonprofit corporation may:
 

• pay salaries to employees; 
• hold the required board meetings anywhere; 
• provide health and other benefits, and perks (club memberships, special events, etc.); and 
• reimburse employees for expenses incurred during

Popular 501(c)(3) programs include:
 

• Welfare-to-work  
• Child and elder care  
• Computer literacy training
• Job skills, life skills, & convict re-entry  
• Homeowner awareness, education, and assistance, and  
• Any type of program that helps to relieve disadvantaged community members.  

Nonprofit corporations are also allowed to generate revenue, provide services for a fee, and sell products that relate to some form of community service.  The revenues generated in this way are all tax-free.  Nonprofit corporations are an attractive alternative to traditional for-profit businesses because they are allowed to pay salaries, provide comprehensive benefits, and offer other perks associated with 'normal' employment.

Most prosperous for-profit companies have a nonprofit "sister".  And while the nonprofit must use their resources for a community service, nothing prevents the nonprofit from referring business to, or even subcontracting, for-profit businesses to perform some function(s).

For the business executive, CEO Services Group will form the nonprofit corporation, secure the applicable tax exemptions, and provide detailed guidance regarding how to grow your business and fill a need in the community at the same time.  Contact CEO Services Group for more information.