In this column, we will discuss the establishment of a non-profit corporation, which plays an important role in the welfare and development of our society. Non-profit organizations are often the backbone of our society, providing much-needed services and assistance among for-profit or private companies and government agencies. It is hard not to think about how the continuous dedication and hard work of countless volunteers, non-profit workers, and various organizations have contributed to the development of our community, the Korean community, and the wider society.
A nonprofit organization is a legal entity that exists for social or common benefit through charitable or social contribution activities. This includes religious, educational, and academic foundations such as churches and schools around us, as well as organizations with charitable, cultural, and social purposes such as clubs and alumni associations. One such organization is the ALS Association, which recently launched the much-publicized “Ice Bucket Challenge,” with celebrities dousing themselves in ice water.
One of the biggest benefits of being a nonprofit foundation is the tax exemptions you receive. The government recognizes that you’re working for the common good and gives you tax exemptions and reductions that other for-profit entities don’t get. This applies not only to federal taxes, but also to state taxes, and sometimes extends to donors who give to that particular nonprofit foundation.
Once the purpose and objectives of the organization have been discussed and the decision has been made to operate as a corporation, you can proceed with the incorporation of the nonprofit organization. To form a nonprofit organization, you first need to register as a corporation in your state, which you can do by applying to the government agency that has jurisdiction over the formation and registration of corporations in your state, following the laws and procedures of that state. In New York, these are the Department of State, Division of Corporations, State Records, and UCC; in New Jersey, the State of New Jersey and Division of Revenue and Enterprise Services; and in Pennsylvania, the Department of State and Corporation Bureau.
Once your organization is incorporated, you’ll apply for the tax exemption we talked about earlier. There are currently several different types of federal and state tax exemptions, and you’ll see a lot of organizations classified as “501(c)(3)” organizations. Even if your organization is actually a nonprofit, it will be subject to taxation if it hasn’t applied for “tax-exempt status,” so it’s important to apply for tax-exempt status after incorporation to receive those benefits.
In addition, it is necessary to organize the board of directors by electing directors and establishing bylaws, find an office that will actually be used by the foundation and review detailed procedures such as real estate sales or lease contracts, and consider and plan in advance for the foundation’s financial operation plan and how to raise funds as a non-profit foundation.
If you have any questions about setting up a nonprofit foundation, or if there are any laws that our readers would like to know about, please do not hesitate to contact us at mail@songlawfirm.com.
