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What is a Not-For-Profit Corporation?

Every not-for-profit corporation formed in Kansas must include in its name one of the words of incorporation which are "association," "church," "college," "company," "corporation," "club," "foundation," "fund," "incorporated," "institute," "society," "union," "university," "syndicate" or "limited," or one of the abbreviations "co.," "corp.," "inc.," or "ltd."

  • The not-for-profit corporation must designate:
    • a resident agent,
    • a registered office address,
    • a mailing address,
    • one or more incorporators, which can be either an individual or a business, and any directors.
  • Registration with the Office of the Secretary of State is required.
  • A not-for-profit corporation may need to register debt securities with the Office of the Securities Commissioner.

There are three main characteristics that distinguish a not-for-profit corporation from a for-profit business enterprise.

  • Significant amounts of revenues are received from providers or entities that do not expect to receive either repayment or economic benefits relative to the amounts provided.
  • There is no defined ownership that can be sold, redeemed or transferred, nor is there entitlement to a share of the assets if the organization is liquidated.
  • The purpose of the operation is not to produce a profit.

There are more than 25 categories of tax-exempt organizations classified under Section 501(c)(3), and Section 501(a) of the Internal Revenue Code, as well as additional types of entities under other sections of the code. Some of the major classifications include: civic leagues, religious organizations, chambers of commerce, recreation clubs, social clubs, labor organizations, libraries, museums and voluntary health and welfare organizations.

An organization that wants to be a nonprofit entity must apply for tax-exempt status from the IRS and pay a user fee. Tax exemption is a privilege granted by Congress through the IRS. In return, nonprofit organizations are subject to a range of IRS requirements that differ from those for business enterprises. Among those is the requirement that a nonprofit organization's activities (income and expenses) be substantially related to its exempt purpose. A nonprofit organization must limit all partisan political activity, as well as limit lobbying activities. In addition, none of the nonprofit organization's assets can ensure benefit to any private individual.

Most nonprofit organizations are required to file an Annual Tax Return, Form 990. If more than $1,000 of income is received, that was not related to the exempt purpose, Form 990T must be completed and taxes on those receipts paid.

The best course of action to take before starting activities is to seek competent professional help prior to assuming you are a nonprofit organization. For more information, contact the IRS at (800) 829-1040 or at www.irs.gov/Forms-&-Pubs. Or to order IRS Publication 557 Tax Exempt Status for Your Organization, contact the IRS at (800) 829-3676.

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