One of your first steps after founding a nonprofit organization, even before applying to the IRS for tax-exempt status, should be to incorporate. While it involves mundane paperwork, there are numerous benefits of incorporating that will help your nonprofit in the future. Here a few circumstances where a corporation will be an asset:
Your organization makes a profit from its activities: It's not uncommon for nonprofits to turn profits for certain activities. For example, an educational foundation may not regularly see earnings for the work they conduct, but what happens when a local college asks the group to run a book club as a part of the college curriculum for a fee? The organization now shows a profit. Incorporation protects nonprofits by precluding taxation on income related to their activities.
You want to apply for a tax-exempt status: Tax-exempt status allows nonprofits to apply for public and private grants. While it is possible to form a tax-exempt association instead of a corporation, associations have a much tougher time qualifying for tax exemption. Non-corporate entities are required to prepare and adopt a complicated set of operational rules and organizational papers. Nonprofit corporations have a much easier time gaining IRS approval. Incorporated and tax-exempt non-profits can also help donors, who will be able to deduct gifts to the organization on their federal and state returns.
You want protection from personal liability: Incorporation is a simple way to protect a group's personal assets in the case of a lawsuit. While nonprofit corporations can be sued, their members will have the peace of mind of knowing that their own money, homes, cars or other property aren't at risk.
Have you recently established a nonprofit organization? Make sure to get in touch with registered agent services as soon as possible and take steps to ensure you are incorporating your business in a timely fashion.