Non Profits

2 Pages 446 Words

A nonprofit is a tax-exempt organization that serves the public interest. In general, the purpose of this type of organization must be charitable, educational, scientific, religious or literary. These organizations can be unincorporated or incorporated. An unincorporated nonprofit is somewhat rare for while it can be given federal tax-exempt status or the designation of being a 501(c)(3) organization as defined by the Internal Revenue Service, it does not enjoy the legal protection a corporation provides. When a nonprofit organization is incorporated, it shares many traits with for-profit corporations except that there are no shareholders.
There are three main types of NPO’s: Public-benefit corporations, mutual benefit corporations, and religious corporations. Public benefit corporations can only distribute assets to other public benefit corporations. Mutual benefit corporations can distribute assets to their own members, and under certain conditions as well as for public benefit purposes. Religious corporations must follow the rules of their governing bodies.
Non profit public benefit corporations hold their assets in what is called charitable trust. A charitable trust is an entity that holds money or assets for charitable purposes. The difference for the NPO’s is that unlike profitable companies, if the charitable trusts have surplus revenue, they belong to the public the corporation was designed to serve. If the corporation becomes a profit company, the surplus becomes a donation to another charitable service.
Just as the name indicates, religious corporations are formed primarily or exclusively for religious purposes. These groups can qualify as religious organizations under both state incorporation law and Section 501(c) (3). You need not set up a formal church to form a religious nonprofit corporation; these groups can have a general religious purpose. For example, a group organized to promote the study and practice of a p...