A Non-Profit Organization (NPO) is set up to fulfill a particular social cause or for advocating a shared point of view. An NPO may also be referred to as a Non-Business Entity, Not for Profit Organization, or a Non-Profit Institution. An NPO is a type of organization which, instead of distributing its surplus to the shareholders of entity, or its members, uses the surpluses of revenue earned by it to further achieve the ultimate objective for which it was formed in the first place. NPO is one of the attractive types of organizations as it is exempt from tax, i.e., no income tax is required to be paid on the money received.
The key characteristics of NPO’s are that they are Accountable, Honest, Trustworthy and open to every person who invested their time, money, and faith in the organization which includes the donors, funders, volunteers, and collective society.
CERTAIN BENEFITS OFFERED BY NONPROFIT CORPORATIONS:
- NPO has its own separate existance. It can enter into contracts, sue and be sued in its own name and is solely responsible for its contractual and other obligations.
- The directors, officers and members are protected against being held personally liable for the accountability of the company.
- It can apply for both federal and state tax exempt status.
- Some NPO’sare eligible to receive public and private grants making it easier to get operating capital.
- Donations to nonprofit corporations made by individuals are tax-deductible.
FORMATION OF A TAX EXEMPT FOR NON PROFIT CORPORATION:
The state laws of Tax-exempt non-profits are different to the laws of corporations,butthe documentation and compliance obligations of business are similar. Form 1023 must be filed with IRS and should also be approved by it for a non-profit corporation to get the status of being ‘Tax-Exempt’. In addition to Form 1023, some states also require a state-level tax-exempt status filing. Apart from the legal filings it must generate public benefit and indulge in educational, charitable, religious, scientific or cruelty prevention causes or purposes.
Non-Profits are a great way to serve the society and community for a social and noble cause. In United States IRS determines the validity and Tax status of NPO’s
Non-profit organization must take an extra step of applying for Tax Exempt status with IRS and once it is qualified for that status then organization will not have to pay the tax on certain income. The organization still must pay employment taxes, file annual reports at both Fed and state level but some states exempt them from paying sales tax. Such organization may have to pay unrelated business income tax if the income is not substantially related to the charitable purpose. Non-Profits filings include 990EZ, 990, post card filing etc.
The key to keeping the doors of the organization open is to provide an overall satisfaction to the customers and the public as ‘Clientele’ often plays an important role in increasing the lifespan of the business. some of nonprofit organizations like hospitals, universities, national charities, churches and foundations.
USATAXX believes in Improving communities and changing lives. Integrity & Trust are ways to safeguard assets and they also help with effective tax planning for next generation. In the transition to the next generation, we’ll continue to provide the same trustworthiness and depth of experience to all our customers.
We help with formations as well as Form 1041 filings.