Form a California Nonprofit Corporation

form a california nonprofit

A nonprofit corporation is a corporation formed for purposes other than generating a profit. Although a nonprofit can make a profit and participate in profit-making activities, no part of the organization’s income can be distributed to its directors or officers; however, a nonprofit organization can pay reasonable salaries to officers, employees, and others who perform services for it.

A nonprofit corporation can be a church or church association, school, charity, medical provider, legal aid society, volunteer services organization, professional association, research institute, museum, or in some cases a sports association. Nonprofit corporations can apply for tax-exempt status at both the federal and state level.

Prohibition on political and legislative activities

An important issue is the federal tax code’s rule against 501(c)(3) organizations engaging in political and legislative activities. Because the proscribed activities violate the tax code (and may result in the revocation of the organization’s tax-exempt status, the imposition of an excise tax, and liability for back taxes), you must understand how 501(c)(3) defines each type of activity:

  • Political activity – direct or indirect participation in any political campaign for elected public office.
  • Legislative activity – No “substantial part” of a 501(c)(3) organization’s activities may be devoted to lobbying. Influencing legislation includes any of the following activities: support of or opposition to legislation, direct contact with members of a legislative body, urging the public, or a segment of the public, to contact members of a legislative body.

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