What are the differences between for-profit and non-profit corporations?
Profit corporations are authorized to issue shares of stock to shareholders in return for capital investments. Shareholders receive a return on their investments when dividends are paid or when assets are distributed after dissolution. Non-profit corporations neither issue shares nor pay dividends, no part of the income may be distributed to its members, directors, or officers.
Is a non-profit corporation exempt from taxes?
Non-profit does not mean tax-exempt. A “tax-exempt organization” is a unique entity that is usually a non-profit organization. However, a non-profit organization cannot be exempt from Federal and State income or franchise tax until it applies for an exemption. The IRS and the state franchise board issues a determination of exemption.
Can one person be the sole director and officer of a non-profit corporation?
Most states require three directors to form a non-profit. The following states will require less than three directors if there are less than three members:
The following states require only one director:
Can a non-profit corporation make a profit?
Yes. A non-profit corporation can take in more money than it spends. It can use tax-free profits for its operating expenses, including salaries. What a non-profit corporation cannot do is distribute any profits to officers, directors, or employees.
Who has the authority to investigate the activities of a non-profit corporation?
The Attorney General has statutory authority to (1) investigate charities that operate as non-profit corporations, and (2) inspect the books and records of all corporations, including non-profit corporations. The Secretary of State has no such authority.
Is there a difference between a "trustee" and a "director"?
No. A Board of Trustees is equivalent to a Board of Directors. Some non-profit's find it advantageous to have a Board of Advisors and may choose to describe its powers in the bylaws. A Board of Advisers has no legal authority unless the bylaws or articles indicate otherwise.
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