Nonprofit Corporations
A nonprofit corporation is a corporation organized in your state, whose principal purpose is public benefit. A nonprofit corporation affords a shield against potential liability for directors, officers, employees, and other representatives of the corporation. This protection is not available for unincorporated nonprofit associations and organizations.
A nonprofit corporation may be a church, church association, charity, health care provider, school, volunteer organization, legal aid society, research society, museum, business association, employment association, or sports organization.
Making a Profit:
Nonprofit does not literally mean that a corporation cannot make a profit. A nonprofit corporation can acquire more income that it spends on its exempt purpose. This profit can be utilized for operating expenses, including salaries. A nonprofit corporation may pay a reasonable salary to its officers, directors and/or employees for services rendered to the nonprofit corporation and associated to its exempt purpose.
DO NOT CONFUSE A Nonprofit CORPORATION WITH AN IRS 501(c)(3) TAX-EXEMPT CORPORATION.
Being formed as a nonprofit corporation does not automatically mean that the nonprofit corporation is tax-exempt for federal and, in some instances, state income tax. A "tax-exempt" corporation is a distinctive entity that has gained an exemption from income tax liability from the IRS and/or from the state. A nonprofit corporation is not eligible for exemption from income tax liability until it applies for and has been approved by the IRS for tax-exempt status.
