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. Nonprofit corporations neither issue shares nor pay dividends, no part of the income may be distributed to its members, directors, or officers.
Nonprofit does not mean tax-exempt. A “tax-exempt organization” is a unique entity that is usually a nonprofit organization. However, a nonprofit organization cannot be exempt from Federal and State income or franchise tax until the organization applies for an exemption and the IRS and the state franchise board issues a determination of exemption.
Most states require three directors to form a nonprofit. The following states will require less than three directors if there are less than three members:
The following states require only one director:
Yes. A nonprofit corporation can take in more money than it spends. It can use the tax free profits for its own operating expenses including salaries. What a nonprofit corporation cannot do is distribute any profits to officers, directors or employees.
The Attorney General has statutory authority to (1) investigate charities that operate as nonprofit corporations, and (2) inspect the books and records of all corporations, including nonprofit corporations. The Secretary of State has no such authority.
No. A Board of Trustees is equivalent to a Board of Directors. Some nonprofit'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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