Nonprofit corporations are regulated under Section 501(c) of the Internal Revenue Code. The purpose of nonprofit corporations is not to make profits for the owners.
Key Characteristics
- Public charities are the most common type of 501(c)(3). This type of nonprofit may accept donations, which are tax-deductible.
- While nonprofits are generally organized as corporations, they can also be formed as LLCs.
- Nonprofit corporations are formed under state law, and as a result, are subject to state rules and regulations after their formation.
- A nonprofit corporation is formed the same way as a for-profit corporation, with the additional step of obtaining tax-exempt status from the IRS.
- Non-profit corporations enjoy the same limited liability protection that regular corporations and limited liability companies enjoy.
- A nonprofit corporation doesn’t pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives.
Mission and Goals
- The purpose of non-profit corporations is to make people’s lives better in their society, state, country, or around the world.
- Non-profit organizations are dedicated to advancing the public interest.
- Their goals include relieving poverty and providing necessities to those without simple amenities.
Frequently Asked Questions
Is a non-profit an S Corp or C Corp?
Nonprofit corporations are neither; they are a unique entity type that is eligible for tax-exempt status based on their charitable purposes.
Can a nonprofit own an S Corp?
This would depend on the laws and regulations pertaining to the ownership of S corps and the specific nonprofit’s tax-exempt status and operational activities.