Types of Nonprofit Entities
Types of Nonprofit Entities – Sacramento Business Attorneys
When forming a Nonprofit California Corporation, you must decide what type of entity your corporation will be: public benefit, mutual benefit, or religious. This decision is incredibly important because each entity effects, for example, it’s members, directors, investment standards, Attorney General investigations, and filing and reporting requirements differently. Moreover, choosing the wrong entity may result in the Government rejecting your incorporation documents or your tax exemption status. So, what types of nonprofit entities are out there?
A religious corporation is organized exclusively for religious purposes, like operating a church.1
A public benefit corporation is primarily for public or charitable purposes.2 The definition of charitable purpose is expansive, but very particular and specific at the same time. Generally speaking, public benefit corporations are organizations that intend to obtain state and federal tax exempt status. However, it’s important to understand that there are even subsections of nonprofit public benefit corporations, like private foundations for example.
A mutual benefit corporation is organized for any lawful purpose other than religious, charitable, civic league or social welfare.2 A mutual benefit corporation may still receive tax exemptions, but it is more difficult and the organization may not be entitled to both State and Federal exemptions. These exemptions will truly depend on the activities and purpose of the organization.
Here are a few considerations, among many, we will use to help make the proper decision for your entity:
- What activities will your organization be engaged in;
- Will these activities will be for a profit;
- Will your organization have members;
- Will the activities involve any risk of liability; and,
- Will the organization own any real property.
Contact our Sacramento nonprofit attorneys to discuss the types of nonprofit entities
Determining which entity you should choose, or which entity you are required to choose, is one of the first steps to incorporating a nonprofit. Feel free to contact our nonprofit attorneys for help in making this determination.
By: Trevor Carson Google+
*The information provided in this post does not constitute legal advice or opinion. The information is for guidance purposes only. Individual situations vary and you should contact us for a consultation. Attorney advertisement. Image: FreeDigitalPhotos.net. Sacramento Business and Nonprofit Attorneys on Types of Nonprofit Entities.