Lesson 1 of 11
What is a nonprofit corporation?
A nonprofit corporation is created under state law like any other corporation, but with a defining restriction: it has no owners and cannot distribute its earnings to individuals who control it.
Key characteristics
- No shareholders and no ownership interests
- Governed by a board of directors, not by owners
- Surplus must be used to advance the organisation's purpose
- Assets are generally dedicated to charitable purposes on dissolution
- Staff and directors may be paid reasonably for actual work
Nonprofit does not mean no revenue
A nonprofit can charge for services, sell goods and run a surplus. The restriction is on where the surplus goes, not on earning it.
Nonprofit is a state law status. Tax exempt is a federal tax status. You can be one without the other.
Want help with the paperwork?
You can incorporate and apply for exemption yourself using the steps in this course. If you would rather have support, Gullia Filing prepares and files your nonprofit incorporation, supplies compliant bylaws and conflict of interest policy, and obtains your EIN.