What to know about nonprofit entities

| Nov 23, 2020 | BLOG

In 2015, there were 1.56 million nonprofit organizations in Nevada and throughout the United States. This type of entity seeks to benefit the public as opposed to its owners or shareholders. These organizations generally engage in activities such as preventing cruelty to animals or teaching children to read.

How are nonprofit entities funded?

In most cases, a nonprofit organization is funded through government grants or donations from its members. It may also receive grants from other nonprofit entities that exist simply to fund various causes throughout the community. Finally, nonprofit entities can generate revenue by selling goods or charging a fee for services offered to the public.

Income must be used to benefit the organization

If a nonprofit entity generates a cash surplus, it must be used to further its mission. For instance, the money may be used to hire an accountant, buy equipment or pay someone to assist in the process of soliciting donations. However, such a surplus cannot be used to provide additional compensation to owners or other stakeholders.

Nonprofit groups are required to file tax returns

Generally speaking, nonprofit organizations are exempt from paying federal taxes. In some cases, they may be exempt from paying state taxes as well. However, they must file Form 990 with the IRS each year, and this form must be made available for public review. State or federal law may also require tax-exempt organizations to make additional information available to the public upon request.

No one controls the organization

A nonprofit group is run by a board of directors that anyone can be removed from at any time. Generally speaking, those who serve on the board are not compensated for their time. However, they may be reimbursed for travel or other expenses.

If you are thinking about starting a corporation, you may want to consult a business law attorney. Legal counsel may be able to help you learn more about how to structure the organization and any filing requirements that it will need to abide by.