What is a Nonprofit?

The most common type of nonprofit is the non-profit corporation. It is a corporation. It is taxed the same as corporation (unless it receives tax-exempt status from the IRS), offers the same limited liability, the same formalities and maintenance requirements of a corporation. The only real difference is that non-profit corporations don’t offer stock, and thus, don’t have shareholders. That’s why some states refer to non-profit corporations as nonstock corporations.

Within the nonprofit entity type, there are three main types of purposes:

  1. Mutual benefit organizations: like homeowners’ associations, chambers of commerce, downtown business associations, trade associations, or any group of similar people or businesses that get together to champion a cause that would benefit all of them. These organizations are typically not tax exempt.
  2. Public benefit organizations: like churches, schools, educational, or scientific organizations. Something that anyone and everyone could have the opportunity to benefit from. These are most likely the type of organizations that anyone and everyone has or could have a reason to donate to.
  3. Cooperative associations: typically have shares and you set a minimum amount of shares required to become members. Associations have directors also but no officers.

Do Nonprofits Make a Profit?

If a nonprofit is successful, it’s making a profit. The difference between non-profit corporations and for-profit corporations is what those corporations do with their profits. For-profit corporations distribute profits to its shareholders. Non-profit corporations distribute their profits to charities or similar organizations. None of a nonprofit’s earnings go to an individual or other entity as beneficial income.

Can a Nonprofit Pay Employees Wages?

Absolutely. Things like wages and salaries are part of the cost of doing business. Its only the net-profit (the money left over after all expenses are paid) goes to charity or similar organization. Even tax-exempt nonprofits are allowed to pay competitive wages to their employees. The monetary compensation must be what the IRS vaguely describes as a “reasonable wage.”

Important Nonprofit Forms:

Free nonprofit forms for download

Formation Document Names By State:

Articles of Incorporation:

AK, AZ, AR, CA, CO, DC, FL, GA, HI, ID, IL, IN, IA, KY, LA, ME, MD, MI, MN, MS, MO, MT, NE, NV, OR, PA,RI, SC, SD, TN, UT, VT, VA, WA, WV, WI, WY

Certificate of Incorporation:

NY, OK, DE, CT

Certificate of Formation:

TX, AL

Articles of Agreement:

NH

Articles of Organization:

MA

Not for Profit Articles of Incorporation

KS

Other Non Profit Facts:

States that require a minimum number of incorporators:

OK – 3, AK – 3, NH – 5, NM – 3, NY – 3, TX – 3

States that allow a corporation to be the incorporator:

KS, ME, WA, NM, PA

States that don’t provide a form:

CA, NE, GA, and IA don’t offer domestic non profit articles of incorporation, but we have our own, drafted from their laws. California offers samples with the minimum required by law and meant as a guideline for preparing your own articles. We offer California non profit documents here for free.

Start Your Non-Profit Corporation Now!

Nonprofit Information By State:

A Realistic Look at Starting a Nonprofit:Additional Resources:

What is a registered agent?
Why hire Northwest to form your nonprofit?
Business formation FAQ
What is a benefit corporation?