Owning and operating a business can look vastly different from one business to another. Depending on the type of business, the process of creating and maintaining it can include a wide range of tasks and responsibilities.
For those starting or operating a nonprofit, there are many benefits for this type of business. While the underlying purpose of a nonprofit is likely a benefit of its own, there are many benefits to having a nonprofit that can be very attractive.
Benefits of a nonprofit
A nonprofit offers many philanthropic benefits. This includes obtaining more credibility when seeking donations and grants. Nonprofits have the ability to solicit funds from donors while allowing their donors to enjoy the benefit of having their donation tax-exempt. They can also apply for grants and avoid using their donations to pay corporate taxes.
The tax-exempt status is a major benefit of a nonprofit; however, there are some drawbacks to this. In order to enjoy this status, a nonprofit must continually maintain their tax-exempt status, which means dealing with the IRS, looping profits back into the organization, keeping a detailed record of all business conducted and routinely have board meetings.
Tax-exempt status
For a nonprofit, maintaining their tax-exempt status is a continuous and ongoing process, and it is their bylaws, records as well as the state and federal filing laws that are pivotal to this. Put simply, in order to maintain this status, a nonprofit must adhere to their bylaws, keep a detailed record of all activities and file state and federal tax forms annually.
While the benefits of a nonprofit are advantageous, forming and operating a nonprofit can come with challenges. Because it can require much time, effort and documentation, it is important to seek guidance from a legal professional to aid with any questions or obstacles faced.