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Similarities to “For-Profit” corporations
Many of the characteristics of the C-Corporation discussed herein apply to nonprofit corporations as well. Nonprofit corporations, however, have some very distinct features specific to this type of entity.
Tax Exemption under 501(c)(3)
In contrast to the other types of corporations discussed herein, under Federal Tax Code Section 501(c)(3), a tax-exempt corporation cannot pay dividends AND, upon dissolution, must distribute its remaining assets to another nonprofit group or certain other recipients as mandated by the statutes.
Miscellaneous Advantages
- Lower postal rates on bulk mail.
- Discounted advertising rates provided by organizations that support nonprofit entities.
- Discounted Internet Access rates.
- Discounted membership rates offered by national chain stores such as Costco.
- Federally subsidized job-training and work-study programs for nonprofit corporation employees.
The Burdens of Operating a Nonprofit Corporation
- Enormous paperwork and filing requirements to obtain tax exempt status
- Federal & State Filings required to obtain tax-exempt status
- Limitations imposed on the types of activities that may be conducted by the corporation.
Miscellaneous Limitations
Pursuit of the following corporate purposes only:
- Charitable
- Educational
- Religious
- Literary
- Scientific
- No distribution of financial gains to directors, officers or members.
- Corporate assets may only be distributed to another tax exempt organization upon dissolution of the nonprofit corporation.
- Participation in political campaigns for or against persons running for public office is prohibited.
- Substantial engagement in legislative political activities is forbidden.
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