Most corporations are formed for the purposes of providing goods or services in order to make a profit for owners. However, there are also corporations that are created for a different reason. These corporations may be created in order to do something good for the public, to improve society or to fulfill a charitable goal. When a corporation is formed in order to do something for society or improve life for others, the corporation is eligible for tax-exempt status.
Companies that are granted tax-exempt status may be referred to as nonprofits. There are different categories under the Internal Revenue Service (IRS) code that allow for a company to receive tax-exempt status. Most corporations formed for the public good are able to get an exemption from taxes under section 501(c)(3). As a result, these businesses are also called 501(c)(3) organizations. To become a nonprofit corporation, you will need to go through the process of incorporating and of submitting an application to the IRS. An experienced San Diego business formation lawyer at Sepahi Law Group, APC can provide the assistance you need. Call today to schedule a consultation and learn more.
Forming a Nonprofit Corporation
The first step in starting a nonprofit corporation is to go through the process of incorporating your business. This is done using similar steps as a for-profit business. For example, you will need to complete the Articles of Incorporation and file the required forms with the California Secretary of State. There are different forms for different kinds of nonprofits, including:
- Articles of Incorporation – Nonprofit Mutual Benefit (Form ARTS-MU)
- Articles of Incorporation – Nonprofit Public Benefit (Form ARTS-PB-501(c)(3))
- Articles of Incorporation – Nonprofit Religious (Form ARTS-RE)
You will need to select a name for your nonprofit corporation and ensure you have secured all necessary state licensing to conduct the type of business or provide the services that you wish to offer.
Once you have gone through the official process of incorporating, the next steps are to secure your tax exempt status. You will need to provide information to the Internal Revenue Service demonstrating that your business is “organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual.”
Exempt purposes include:
- Charitable purposes.
- Religious purposes.
- Educational purposes.
- Scientific purposes.
- Literary purposes.
- Testing for public safety.
- Fostering sports competition on a national or international level.
- Preventing cruelty to children.
- Preventing cruelty to animals.
Further, charitable is defined by the IRS to include relief of the poor, underprivileged or distressed; as well as advancement of religion, science or education; erecting or maintaing monuments or public buildings; lessening tensions in the neighborhood; reducing the burdens of government; eliminating discrimination or prejudice; combatting deterioration in the community; preventing juvenile delinquency; or defending human rights or civil rights.
Providing sufficient proof to the IRS of your organization’s intent can be complicated, as can determining exactly what paperwork is required when forming a nonprofit corporation. An experienced San Diego corporate formation lawyer at Sepahi Law Group, APC can help throughout this process. Call today to schedule a consultation and learn more about how an attorney can help you.