What Is Non-For Profit Corporation?

Religious Corporation

A religious corporation is a type of religious non-profit organization, which has been incorporated under the law defined by the concerned authorities.

It is usually the government, who holds records of non-profit religious organizations, is responsible for regulating these religious not-for-profit corporations, say for instance Secretary of State. These not-for-profit religious corporations are recognized under the law on sub national level and usually Secretary of State of that particular state will be monitoring the activities of such religious corporations.

If we compare Religious corporations with other tax-exempt organizations then these religious non profit corporations are subject to less state and federal filing and reporting requirements. Depending on the state in which they are incorporated, they may also be exempt from some of the inspections or regulations governing non-religious groups performing the same services.

Corporation sole

Non profit religious corporations need to designate a person to act in the capacity of Corporation Sole. He is a person who acts as the bona fide holder of title on property and so on for these religious societies or corporations.

How can a religious not for profit corporation be formed?

Any church, congregation or society formed for the purposes of religious worship, may become incorporated in the manner following: 

By electing or appointing two or more of its members as trustees, at any meeting held for that purpose, and may adopt a corporate name; and upon the filing of the affidavit, as hereinafter provided, it shall be and remain a body politic and corporate, by the name so adopted.

Filing certificates of incorporation of religious corporations

The certificate of incorporation of a religious corporation shall be acknowledged or proved before an officer authorized to take the acknowledgment or proof of deeds or conveyances of real estate, to be recorded in the county in which the principal office or place of worship of said corporation is or is intended to be situated, and shall be filed and recorded in the office of the clerk of said county.

It may also be filed and recorded in the office of the secretary of state. Where a religious not-for-profit corporation removes to another county within the state a duplicate copy of its certificate of incorporation together with a statement of such removal duly signed and acknowledged by the directors and officers of said religious corporation may be filed in the office of the clerk of said county to which it has removed.

And every act, deed, matter and thing done or performed by every such religious society or corporation since the recording of its certificate in the office of said county clerk is hereby ratified, confirmed and declared to be as valid in all respects as if the said certificate has been properly and appropriately recorded in the office of the register of the county in which said religious society or corporation was organized; but this section shall not affect any suit or proceeding already commenced arising out of such original mistake.

Rights and duties of trustees of religious corporations

The trustees of every religious corporation shall have the custody and control of all the temporalities and property, real and personal, belonging to the corporation and of the revenues there from, and shall administer the same in accordance with the discipline, rules and usages of the corporation and of the ecclesiastical governing body, if any, to which the corporation is subject, and with the provisions of law relating thereto, for the support and maintenance of the corporation, or, providing the members of the corporation at a meeting thereof shall so authorize, of some religious, charitable, benevolent or educational object conducted by said corporation or in connection with it, or with the denomination, if any, with which it is connected;

They shall not use such property or revenues for any other purpose or divert the same from such uses.

They may transfer all or any part of the real or personal estate of such religious non-profit corporation to such bank or trust company organized or existing under the laws of the State where it was incorporated, or to a national banking association whose principal office is located in the State of New York as may be designated by them or to a holding company, organized under the laws of the State of New York, of the same religious denomination, such property to be held in trust or in safekeeping or custody, to collect the income thereof and pay over the same to the trustees of such religious corporation at such times and in such manner as shall be agreed upon

They may also delegate and grant to the trustee or custodian designated by them all or any portion of the powers, responsibilities and discretionary authority possessed by them with respect to the retention and the investment and reinvestment of such property or any part thereof, and may from time to time modify such powers delegated by them or designate successor or different trustees or custodians within the limits and subject to the regulations and restrictions contained in this section.

What is Non-For Profit Corporation?

A non-profit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples of nonprofit organizations include charities (i.e. charitable organizations), trade unions, and public arts organizations. Most governments and government agencies meet this definition, but in most countries they are considered a separate type of organization and not counted as nonprofit organizations. 

What are the Legal aspects?

There is a wide diversity of structures and purposes in the nonprofit organization landscape. For legal classification and eventual scrutiny, there are, nevertheless, some structural elements of prime legal importance:

• Economic activity
• Supervision and management provisions
• Representation
• Accountability and Auditing provisions
• Provisions for the amendment of the statutes or articles of incorporation
• Provisions for the dissolution of the entity
• Tax status of corporate and private donors
• Tax status of the foundation

Benefits of Nonprofit Corporation

Nonprofit corporations enjoy an exemption from corporate income taxes on profits from activities that are related to their organizational purpose. Also, a nonprofit is permitted to raise funds by receiving public and private grant money and donations from individuals and companies. (And the tax laws encourage people and businesses to donate money and property by allowing donors to deduct their contributions on their own tax returns.) Finally, structuring an organization as a nonprofit corporation protects its directors, officers, and members from personal liability for the corporation's debts and liabilities.

Formation of a nonprofit corporation

There are several steps you must take to create a not for profit corporation. The first is filing a short document, usually called "articles of incorporation," with the corporations division of your state government. The name of your corporation .

• The corporation's address
• The name and address of a "registered agent" (a person who agrees to receive legal papers on behalf of the corporation), and sometimes
• The names of the corporation's directors.

Tax exemption

In many countries, nonprofits may apply for tax exempt status, so that the organization itself may be exempt from income tax and other taxes. In the United States, to be exempt from federal income taxes the organization must meet the requirements set forth by the Internal Revenue Service.

After a recognized type of legal entity has been formed at the state level, it is customary for the nonprofit organization to seek tax exempt status with respect to its income tax obligations. That is typically done by applying to the Internal Revenue Service (IRS), although statutory exemptions exist for limited types of not for profit organizations. The IRS, after reviewing the application to ensure the organization meets the conditions to be recognized as a tax exempt organization (such as the purpose, limitations on spending, and internal safeguards for a charity), may issue an authorization letter to the nonprofit granting it tax exempt status for income tax payment, filing, and deductibility purposes. The exemption does not apply to other Federal taxes such as employment taxes. Additionally, a tax-exempt organization must pay federal tax on income that is unrelated to their exempt purpose. Failure to maintain operations in conformity to the laws may result in an organization losing its tax exempt status.

Individual states and localities offer nonprofits exemptions from other taxes such as sales tax or property tax. Federal tax-exempt status does not guarantee exemption from state and local taxes, and vice versa. These exemptions generally have separate application processes and their requirements may differ from the IRS requirements. Furthermore, even a tax exempt organization may be required to file annual financial reports (IRS Form 990) at the state and federal level.

Issues faced by nonprofit corporations

Capacity building is an ongoing problem faced by nonprofit corporations for a number of reasons. Most rely on external funding (government funds, grants from charitable foundations, direct donations) to maintain their operations and changes in these sources of revenue may influence the reliability or predictability with which the organization can hire and retain staff, sustain facilities, or create programs. In addition, unreliable funding, long hours and low pay can lead to employee burnout and high rates of turnover.

Founder's syndrome is an issue organizations face as they grow. Dynamic founders with a strong vision of how to operate the project try to retain control over the organization, even as new employees or volunteers want to expand the project's scope and try new things.

Can a Non-US-Resident create a non-profit corporation or organization in USA?

In most states A Non-US-resident can create a non profit organization. 

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What is a Corporation?

A Corporation is also referred to as a standard corporation. It is also called a C-Corporation or a Regular Corporation. A Corporation is a legal form of organization of persons and material resources, chartered by the state, for the purpose of conducting business and may have an unlimited number of shareholders, which may include shareholders who are foreign citizens. A Corporation may be public - one in which shares is offered for sale to the public or privately held - one in which shares is not sold to the public. Usually shares are held by the founders, by board members and by private investors, such as venture capitalists, who may or may not sit on the board of directors.

Shareholders are protected from the corporation's liabilities. "Double taxation" frequently occurs, because the corporation is taxed on its profits, and shareholders are also taxed on the distributions they receive, such as profit sharing payments or dividends

The most common type of incorporation is the C Corporation, which is a for-profit, state-incorporated business. A company registration is done with state authorities and must abide by corporate laws in the state where it is incorporated.

To incorporate or register company, you will need to register your business name, file a certificate of incorporation or articles of incorporation and pay a fee. You will also need to draft corporate bylaws and hold a board of director's meeting.

Why should I Incorporate?

Incorporating is one of the best ways a business owner can protect his or her personal assets. Most people choose to incorporate solely for this reason, but there are other advantages as well. For example, the corporate business structure saves you money in taxes, provides greater business flexibility, avoids audit chances, better itemization and lets you more easily raise capital.

There are many advantages to incorporate your business. Liability protection of your personal assets is one of the primary reasons why a small business will form a corporation. Incorporating helps to separate your personal assets from that of your business. A corporation is a legal entity that exists separately from its owners or shareholders. Typically, shareholders are not liable for the debts and obligations of the corporation or from any litigation where the corporation is the defendant in most cases. In a partnership or sole proprietorship, the creditors can go after the owner's personal assets if the company assets are not enough to settle a claim in most cases.

In company registration or corporation formation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions for federal income tax purposes; a Corporation is recognized as a separate taxpaying entity. Corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.

The profit of a Corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

Advantages of Incorporating

Reduces Personal Liability: In most cases owners are not personally liable for the company's losses or debts. Their investments in the registered company are their only financial risk Incorporating helps separate an individual's identity from that of his or her business. Insurance may still be necessary, but incorporation contributes an added layer of protection. 

Tax Savings: There are a number of tax benefits for doing business under incorporation. Depending on your business income, incorporating a Corporation could lower your tax rate. Careful planning of entity type can result in lower overall tax rates. Even if your small business is quite profitable, a corporation is entitled to so many deductions. For example, as the owner of a corporation, your salary and those of your employees are tax-deductible for the business. 

Reduces Likelihood of an IRS Examination: IRS Form 1040 and Schedule C (Profit or Loss from a Business), particularly of higher gross income levels, is the target of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels. 

Anonymity: A Corporation can be established in such a way that shareholders/owners remain anonymous. Often this same anonymity can be accomplished for officers and directors. 

Adds Credibility: A corporate structure communicates permanence and credibility. Even a company with only one stockholder and employee may incorporate. 

Easier Access to Capital Funding : With a corporation, investors are easier to attract through the sale of stock. 

Easier Transfer of Ownership: Through the sale of stock, ownership of a corporation may be transferred without substantially disrupting operations. The need for complex legal documentation is also reduced. 

Shareholders: Your registered company will include shareholders, and you can take the company public. You can also issue stock or stock options to employees. The shareholders have ownership in the incorporated company, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Registered company must adhere to corporate tax laws and file corporate taxes regularly. 

Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC. 

C-Corporation VS S-Corporation VS LLC

If you're incorporating your small business you may have heard that you should "form corporation" or "C-Corporation."

In a C-Corporation, the corporation pays income tax on profits of the corporation. If the corporation pays a dividend to the shareholders, this money is taxed again as income to the shareholders. It may not be as bad as it sounds, though. If you are working for your corporation you should be paid a salary. This salary is deducted from the income of the corporation before taxes, so it will only be taxed once. Depending on the business, salaries may use up most or all of the profit. As long as the salary is not unreasonably high, the IRS should not challenge it. Fringe benefits for employees such as health insurance may also be deducted by a C-Corporation, but not by an S-Corporation. For a profitable and growing company it may be better to be a C-Corporation. In a C-Corporation profits beyond salaries and other deductible expenses can be used by the company for growth rather than being distributed to the shareholders and creating taxable income for them.

An S-Corporation does not have the double level of taxation, corporate and individual, that a C-Corporation has. Instead, profits and losses are distributed among shareholders who report that income or loss on their own federal income taxes. This is the main advantage to electing S-Corporation status.

CLICK HERE TO READ MORE ABOUT S-CORPORATION

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What Is Sales Tax and Sales Tax Id Number ?

What Is Sales Tax?
Sales tax is imposed on all retail sales, leases and rentals of most goods, as well as taxable services. In other words a sales tax is a tax on the end-purchase of a good, so it normally does not apply if a sale is for re-sale or for subsequent processing. Sales tax normally a certain percentage that is added onto the price of a good or service that is purchased.

Your sales tax responsibilities as a new business owner, whether you start a business or buy an existing business, will vary depending on the type of organization or entity you operate. Besides state level, estimation of sales tax is also done on municipal or county levels. Payment of state sales tax depends on your sales and your state's regulations.

Normally it is the consumers who are burdened with sales tax. The re-sellers on the other hand, are exempted from sales tax, provided they do not use the goods on which sales tax is levied.

What Is Sales Tax Id Number?

Sales tax id number or sales tax exemption certificate is a legal document issued by the state. This certificate of authority gives your business the authority to collect the required sales and use taxes, and to issue appropriate sales tax exemption documents, including resale certificates used for purchasing inventory.

Other names : Sales tax id number also known as

• Reseller permit
• Sales tax vendor id number
• Sales tax registration
• Reseller tax id
• Sales tax permit
• Reseller certificate and
• Sales tax exemption certificate
• Certificate of authority
• Sales tax ID number
• State tax ID number

When should I get Sales Tax Registration?

If your business is required to be registered as a sales tax vendor, you must obtain a sales tax permit (also known as sales tax vendor id number, reseller tax id) from the Tax Department. If you make taxable sales before you receive the sales tax exemption certificate, your business may be subject to substantial penalties. 

Why should I get sales tax vendor ID number? (Reseller tax id)
You will need to collect Sales Tax if you are selling a product or offering a service that is taxable. The process of getting a Sales Tax ID is called obtaining a sales tax exemption certificate.

Your state tax id number authorizes you to collect sales tax on your taxable sales. Once you receive your state tax id number, you are considered to be in business even if you never make a sale or never open the doors of your establishment. It is therefore important that you file your sales tax returns on time, even if you did not have any taxable sales during the reporting period, to avoid being subject to penalties for not filing

How do I know what is taxable?
Nearly all tangible personal property transferred for value is taxable. This includes property purchased for lease or rent. Most goods, wares, and merchandise are taxable in united state. Services associated with the sale of tangible personal property may also be taxable. Only installation and repair/reconditioning service is not taxable if it is separately stated on the invoice. Most food purchases of unprepared or uncooked food is not taxable. You may write to the InfoTaxSquare.com about the taxability of a specific item. 

What should I do if I change my Organizational Structure?

If your business changes its organizational structure (for example, from a sole proprietorship to a corporation, a limited liability company, or a partnership), the new organization must register as a sales vendor and obtain a new reseller certificate for the new business before you begin operating under the new organizational structure. You must also file a final return for your existing business and surrender the sales tax permit or reseller permit that was issued to the previous business. 

Display your sales tax registration certificate

You must prominently display your sales tax registration certificate at your place of business. If you have no permanent physical location, you can attach it to your truck, cart, wagon, stand, or other vehicle or facility from which you conduct business.

Exempt states for sales taxes

If you conduct business in the following states then you are exempted to collect sales tax.

• ALASKA
• DELAWARE
• MONTANA
• NEW HAMPSHIRE
• OREGON

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