Non-Profit Organization

In a world of big money and big business, small businesses need all the extra help they can get. In some cases, it may benefit an organization involved in charitable, educational, literary, religious, or scientific endeavors to look into non-profit status. Being a corporation has advantages to begin with, and non-profit organizations receive all the benefits of corporate status, like shielding investors and owners from personal liabilities for the companies actions, as well as the benefits of being a not for profit entity.

Advantages of Being Non-Profit

Becoming a non-profit organization involves legalese and plenty of paperwork, but the benefits may outweigh the process. A major benefit includes tax-exempt status in federal, state, and local taxes, enabling an organization to dedicate more of its funds towards achieving their desired goals. Furthermore, non-profit organizations qualify for special grants, government funding, and even special discounted postal rates.

Non-profit organizations are also oftentimes favorite arenas for private citizens and public corporations to donate funds towards, as donations become tax-exempt for the donor. Non-profit organizations still adhere to the same concepts of business management such as record keeping, accountability, and maintaining and monitoring banking transactions, but are generally run by a board of directors, or trustees, while the day to day activities are taken on by officers who must report to the board.

Disadvantages of Being Non-Profit

Although the benefits of non-profit status are enticing, there are a few disadvantages to become a non-profit organization as well. For example, non-profits are just that: not for profit companies. This means that any extra profit made through activities, sales, classes, or performances may not be divided up between employees beyond the payment of reasonable salaries. Also, as a non-profit organization, there are limitations on income sources for the group or organization, and further restrictions on the use of assets to purposes justifying tax exemption.

Initiating the Process

To begin the process of becoming a non-profit organization, contact the state's corporate filing division. They will be able to provide paperwork to help further understand and form a non-profit organization. You will also need to:

• Choose a business name


• File the appropriate state and federal paperwork, including tax exemption


• Form the by-laws that will outline the operating practices, initiatives, and goals for the organization


• Elect a board of directors to hold the first meeting and further establish the paths of pursuit for the company.

By Barbara Poelle