MyCorporation CEO Deborah Sweeney explains the differences and benefits of forming a non-profit or a for-profit business, and the steps you need to take to properly set up this unique entity.
[Video Transcript]: If you want to form a non-profit corporation, the incorporation process is often similar to a for-profit corporation, but there are some important differences to be aware of.
First, create a clear plan before incorporation. Understand what your non-profit organization will be, what societal needs you're addressing. The clearer, more developed your purpose, the easier the incorporation process will be. You also need to figure out a fundraising plan. Think about who the typical donor will be for the organization, and what your plan is to solicit donations and develop a reliable source of donations. When it comes time to incorporate, most non-profit organizations incorporate in the state they operate in. First, you'll need to choose a business name and check for availability. You must also file your Articles of Incorporation with the appropriate state office, usually the Secretary of State. A non-profit corporation, like any other corporation, should also create bylaws detailing the operation of the corporation. Specify how the business will be run, who makes the decisions, how decision-makers are selected, and also important issues. You will also need to apply for an Employer Identification Number, or EIN, with the IRS. This number is necessary to apply for tax exemption. Initially, your non-profit corporation will be subject to federal, state, and local taxes. To enjoy tax exemption, you must apply for federal tax exemption. Some states will also require their own tax exemption application, but many states simply apply a federal exemption to state taxes as well. Certain local governments will allow tax exemptions for non-profits, so consult your local government to find out what local law is.
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