Flashcards in Incorporation Deck (17):
What are the advantages of incorporation?
(1) Limited liability for directors, officers, and members; (2) Facilitate process of applying for tax exemption; (3) Perpetual existence; and (4) May help generate revenues
What are forms of non-profits?
(1) Not for profit corporations (NFPC) and (2) Unincorporated Association
What are the disadvantages of incorporation?
(1) Depending on scope of services, difficult to qualify as NFPC; (2) Time consuming and expensive; (3) Does not automatically generate revenues; and (4) Difficult to dissolve
What law governs NFPC?
NFPC Law (based on Business Corporation Law)
How is NFPC Law diff from Business Corporation Law?
(1) NFP must be formed for non-pecuniary purpose (not profit-driven and no equity); (2) there are no SHs; and (3) formation process, certain amendments, and dissolution of NFPC more involved.
What are the types of nonprofit corporations under Nonprofit Revitalization Act of 2013?
(1) Charitable (even if ALSO non-charitable purpose) and (2) Non-charitable
How are existing corporations reclassified?
Type A - Non-charitable
Type B or C - Charitable
Type D - Depends on purpose for which formed
What is structure of NPC?
a - Members service similar function as SHs
b - Adds layer of bureaucracy; smaller NPCs may struggle to keep membership list current
(2) Board of Directors
- Responsible for oversight
What is a Benefit (B) Corp?
Business corporation whose directors and officers can be required to consider non-financial values when rendering decisions on behalf of the corporation
What are the key features of B Corps?
(1) Corporate purpose to create general public benefit;
(2) Directors and officers have expanded fiduciary duties that require them to consider non-financial values; and
(3) Has to publish annual report measuring its social and environmental performance against an independent standard.
What is the process of Incorporation?
(1) Reserve name
(2) Prepare Certificate of Incorporation
- Purposes clause as either charitable or non-charitable
(3) File with Department of State
What are By-Laws?
Governs Board operation and is guided by NPCL.
Best practices - conflicts a big issues these days
What is a 501(c)(3) Charitable Organization?
Organized exclusively for religious, educational, charitable etc. purposes (NOT cultural)
Advantages - tax deductible
Limits - lobbying; no partison political activity permitted
What is form 1023?
Application for tax-exempt status.
Within 27 mts of incorporation - status retroactive to incorporation
After 27 mts of incorporation - status retroactive to date of filing 1023
(1) Narrative description of past, present, future activities
(2) Compensation and financial affiliates
What is Form 1023 EZ?
Streamlines for small nonprofits
Requirements: Less than $50K in revenue for past 3 years, less than $50K in revenue projected for next 3 years, and asset value <$250K
Public Charity vs. Private Foundation
Key - source of financial support
(1) prohibited from any lobbying
(2) subject to 2% tax on investment income
(3) no compensation to any directors/ officers
(4) requires certain percentage of distributions annually