Forming a non-profit corporation is a two-step process. First, the organization forms a Delaware non-stock business entity.
Non-stock corporations have no stockholders, are owned by their members, and are typically non-profit organizations.
There can be different classes of members, including voting and non-voting members. The members, as well as the qualifications for membership, are defined in the corporation bylaws.
Some non-stock companies offer memberships to anyone who joins and pays annual dues; others define the members as a specific group of people. For example, a homeowners association may require members to be owners of property in a specific geographic area.
Ultimately, it's the corporation's members who define the qualifications for membership in the written bylaws.
The second step to forming a non-profit corporation is to submit the proper application to the IRS, within 15 months of formation, for non-profit status. This is accomplished by submitting IRS Form 1023.
In order to qualify for non-profit status with the IRS, your Delaware Certificate of Incorporation must include the proper and appropriate clauses that declare your mission and identify the IRS subsection under which you intend to apply.
If you are forming a not-for-profit company to foster national or international amateur sports competitions or for religious, charitable, scientific, public safety, literary or educational purposes, then you want to start with a non-stock corporation and apply to the IRS for 501(c)(3) approval.
Companies that qualify under the IRS Section 501(c) are eligible for special exemptions from all U.S. federal income taxes. The company must have a qualified charitable or religious mission and a specific non-stock structure.
The non-stock corporation structure can also be used for political associations, homeowners associations, political candidates' campaign committees, fraternal organizations, trade associations and community activities, as long as the proper language is incorporated into the Certificate of Incorporation.
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