A "Non-Profit" Corporation is formed at the state level and is considered a ‘for profit’ business at the federal level by the IRS for tax purposes. Non-profit corporations file an 1120 tax election with the IRS, just like all “C” Corporations do, regardless of the state of formation. However, unlike ‘for profit’ corporations, ‘non profit’ corporations may not issue stock and are generally not subject to paying for any state business licensing fees.
A non-profit corporation is not an IRS 501 (c) tax-exempt entity upon formation. Meaning, creating a non-profit organization at the state level does not grant the organization exemption from paying corporate income tax at the federal level. The 501 (c) tax exempt status can only be acquired by applying to the IRS and requesting the tax exemption after a state non-profit corporation has been formed. The 501 (c) federal tax exemption is then only recognized if the IRS approves the application and grants the ‘non profit’ corporation the status of ‘tax exempt’ at the federal level.
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