Should You Incorporate Your Non-Profit

by: Blair Woods

Business filing to incorporate your non-profit organization may seem like a headache.  When you hear the benefits you may decide it’s worth the time it takes to complete your business filing.

Incorporation filing for your non-profit organization provides that same legal protection as a regular corporation.  If your unincorporated non-profit association finds itself in the middle of a legal battle your personal assets may be at risk.  The non-profit corporation can be sued.  However, their members and directors are generally protected from personal liability.  Business filing for your non-profit organization limits the risk to personal property such as, money, cars, houses and other property.

The tax-exempt status alone may be worth filing for your business incorporation.  You can form a tax-exempt association rather than a corporation.  But, qualifying for tax-exempt status without incorporation is much harder.  It requires submitting complex organizational papers and very specific operating rules. It is easier to gain tax-exempt status from the IRS with a non-profit corporation.  Tax exemption certainly has benefits:

• If your association is a tax-exempt non-profit corporation, your donors can deduct their charitable contributions (always a great selling point when you are fundraising)
• If your organization makes a profit from charitable activities, your non-profit corporation won’t pay income tax on the profit
• Tax exemption for non-profit corporations generally includes property taxes on real estate and other property
• Business filing for a non-profit corporation can also open up the door to public and private grants that your non-profit organization would be unlikely to get without tax-exempt status

Personal protection and tax exemption may be your biggest reasons to complete your business filing.  There are a few smaller advantages like discounted rates or services.  For example, non-profit corporations can receive a permit that provides them with reduced postage rates for mailings.

 

 

 

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