- Delaware Nonprofit
Author: Real Estate Holding Company
What is a Nonprofit?
Nonprofit corporations are special types of corporations that are created for one specific reason, in order to carry out charitable, educational, religious, or literary purposes. In addition, non-profit organizations must meet specific tax-exempt purposes. To qualify for Nonprofit status, your corporation must be formed to benefit the public, a specific grouping of people, or the membership of the nonprofit.
Nonprofit corporations do not pay federal or state income taxes on profits from activities. Any activities in which it engages to carry out its objectives are considered non-taxable income. This is because the IRS and state tax agencies believe that the public is given benefits because of these organizations, which entitles them to a special tax-exempt status.
Here are some of the most famous nonprofit companies across the nation.
- Big Brothers Big Sisters of America
- The Nature Conservancy
- Red Cross
- Special Olympics
- World Wildlife Fund (WWF)
Different Type of Delaware Nonprofits
There are 4 main types of non-profit organizations in Delaware.
- Charities: Most often charities provide low-cost or free services to the public. They use these funds to help the public by sourcing donations. These funds can also be raised through fundraising events specifically designed to solicit members of the organization.
- Social Advocacy Organizations: This type of group is based on members. There is always one specific goal that the organization moves towards, works without the goal of achieving a profit. The organization uses donations as well as membership dues to promote a specific social agenda.
- Foundations: Typically with the goal of bettering the community, foundations both work by contributing financially to local charities, and holding events that benefit residents. They are funded by and contributed by for-profit corporations and persons.
- Trade and Professional Organizations: People in the same organization can benefit from the activities of this type of non-profit. They are funded primarily through membership dues.
Pros and Cons of Creating a Nonprofit in Delaware
There are many different advantages and disadvantages of creating a nonprofit in Delaware.
Benefits of Non Profit Corporations
- Exempt from corporate tax incomes
- Allowed to receive public donations (tax laws encourage donations to these corporations)
- Protects from personal liability
- Nonprofits cost money and time to start.
- Once a nonprofit is started, you must keep incredible records and make sure to file all paperwork yearly
- Nonprofits exist to serve the public, therefore they are under great public scrutiny
How to Create a Non Profit Corporation
Pick a Name
Be sure to choose a business name for your nonprofit. After you have decided on this, you can enter your information online, and perform a name search. This should help you to know if this name is already taken. You cannot choose a name that is being used by another non-profit, or even a corporation in the United States.
File Articles on Incorporation
In order to form a nonprofit, it is a requirement to file nonprofit Articles of Incorporation. This must be done with the secretary of state in Delaware, and you must pay the state filing fees. The filing fee in Delaware is $89 with $9 for each additional page.
Write Corporate Bylaws
Bylaws should describe the purpose of the nonprofit. A company’s corporate bylaws need to include the following information.
- How directors are elected
- Authority of the directors
- When, how, and where the director meetings are held
- How decisions can be reached with or without a meeting
- Duties and responsibilities of officers
- How long officers serve
- Officers, constituency rights, responsibilities, and standing committees
- The organizational structure of the nonprofit
Apply for Tax Exemption
Nonprofits are not automatically tax-exempt. Nonprofits must first be approved by filing for tax exemption status by filing a 501c3 with the IRS. The application fee is $275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
Create a Board of Directors
Typically a corporation has officers that include at least a president, treasurer, and secretary, or something similar. When it comes to a non profit, it is sent up in a similar manner. The board of directors is the most important decision when it comes to the incorporation process. The board is important because you will vote with them to elect others later. Important things to go through during the very first board meeting of a non profit include:
- Elect officers
- Form bylaws
- Choose headquarters
- Designate a corporate bank account
- Designate the accounting period
- Document the receipt of tax exemptions
After the meeting completes, similar to a non profit, you should file the minutes of the meeting in your records book. Board meetings must be held at least annually.
Who Should Create a Nonprofit in Delaware?
Non-profit organizations are best for companies and corporations that have a purpose to benefit the public. Whether this is in education, religion, or simply to help a specific group of people. Otherwise, your corporation will not be able to obtain tax-exempt status.
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