Incorporating creates a separate legal entity. This limits personal liability for the nonprofit’s debts and claims. The biggest benefit is that members’ personal assets, like homes or retirement accounts, are protected.
Incorporation also makes it easier to gain tax-exempt status from the IRS. This saves money since the nonprofit does not pay income tax on mission-related profits. Tax-exempt status also allows public and private donations.
Another benefit is discounted postal rates on mailings, which nonprofits rely on for fundraising.
There are ongoing legal requirements after incorporating, like paperwork and regulatory rules. But the liability protection outweighs that burden.
Should a nonprofit be a corporation or incorporated?
Incorporating creates a separate legal entity, limiting personal liability for the nonprofit’s debts and claims. The biggest benefit is that members’ personal assets are protected.
What is the best corporate structure for a nonprofit?
Incorporation can also ease the process of obtaining tax-exempt status from the IRS, which allows nonprofits to benefit from public and private donations and enjoy savings from not paying income tax on profits related to their mission. Additionally, nonprofits can take advantage of discounted postal rates for their mailings. Despite the ongoing legal requirements, such as regular paperwork and adherence to regulations, the advantages of liability protection generally outweigh these burdens.