A non-profit corporation is one that does business for the benefit of the general public without shareholders and without a profit motive. Most corporate procedures and state registration requirements are analogous for profit and non-profit corporations. The main difference is that a non-profit corporation can pay reasonable salary and expenses of the business, but cannot award excessive profit to any person or dividends to shareholders or investors.
Like other businesses, a non-profit needs to have a license to do business in towns in which it has offices and may use an assumed name, so that Blow Inc. could operate as Blow Holes.
A non-profit corporation's assets or ownership is easily transferred through sale of the assets or sale of shares.
The death of the shareholders or directors or officers of a non-profit has no effect on the existence of the it. A non-profit corporation must be legally dissolved to terminate.
Advantages of Non Profit Corporations
Non-profit corporations do not pay corporate income tax if they conduct business exclusively for the benefit of the general public. Most states also provide tax benefits if the non-profit is organized and operated exclusively for either a religious, charitable, scientific, public safety, literary, or educational purpose, or for the purpose of fostering international sports or preventing cruelty to children or animals. The Internal Revenue Service must approve the tax-exempt status of all non-profit organizations except churches. Contributions to non-profit organizations are tax deductible. Under Section 501 of the Internal Revenue Code (26 U.S.C.A. § 501), there are many organizations considered non-profit, including credit unions, civic leagues, recreational clubs, fraternal orders and societies, labor, agricultural, and horticultural organizations, small insurance companies, and organizations of past or present members of the armed forces of the United States.
Disadvantages of Non Profit Corporations
Non-profit corporations tend to be more closely scrutinized by the tax authorities due to the benefits they receive.
Non-profit may not contribute to political campaigns or engage in excessive lobby efforts.
The costs and effort of maintaining a non-profit corporation are higher than some other business forms due to legal requirements standard in corporations which are an annual shareholder meeting, corporate minutes and other procedures which must be followed. Also, a non-profit corporation which has an office in a state other the one its incorporated in must register as a foreign corporation in that state. The cost of incorporation, maintaining an agent for service (a person to receive legal documents required by law), registered as a foreign corporation and upkeep of non-profit corporate procedure documents is higher than some other forms of business.