You have identified a worthy cause and it seems that no other organization is addressing these worthy needs. That means it is time to form a non-profit corporation, right? Well, not necessarily — there are still many considerations to account for prior to making an informed decision.

A non-profit corporation is an incredibly useful form that your charitable entity can take. However you should not simply consider forming one to be a foregone conclusion. You should first consult with others who share your passion, stakeholders and legal counsel to ensure that the corporate form will enhance your organization’s ability to meet its goals. The experienced attorneys of the Jayson Law Group can address these concerns held by many charitable organizations and many others.

Can I form a non-profit in New Jersey?

One of the most common questions asked by those considering a philanthropic or charitable mission is, “Can I form a non-profit corporation in New Jersey?” The answer to this question is often relatively straightforward. Yes, you may form a non-profit corporation in New Jersey provided that the organization has some other lawful purpose aside from monetary gain. However there are other important legal obligations that must be satisfied. These include:

• The non-profit corporation must have at least 3 trustees who have reached age 18 or greater.
• The non-profit corporation may not issue stock.
• The organization must have a registered agent in New Jersey available to receive legal documents.

However it is important to note that forming a non-profit corporation under New Jersey state law does not automatically confer 501(c)(3) status for federal tax purposes. In fact, organizations with gross receipts exceeding $5,000 must file with the IRS before their non-profit status is recognized. Furthermore it is also essential to note that non-profit does not mean “no profit, ever” or that the business must lose money. Rather, it simply means that any profit earned must be reinvested into the company to further the goals and activities of the organization.

What are the advantages of incorporating my charitable operations?

Like with other forms of business & corporate organization, there are a number of advantages that can be gained by achieving status as a non-profit corporation. To start, like a S Corporation, LLC or LLP, incorporating as a non-profit will insulate the personal assets of members, officers and trustees. That is, the personal assets of your biggest supporters will not be at risk should the organization fall into debt or be involved in an accident. Rather, only the corporate assets will available should the non-profit incur significant liabilities.

Non-profit status can also confer significant tax advantages at the local, state and federal levels. These tax benefits include:

• New Jersey non-profits are exempt from the state corporate income tax.
• Non-profits enjoy significant property tax advantages.
• If the non-profit qualifies for 501(c)(3) status the organization will be exempt from federal income tax on income from the organization’s purposes, federal unemployment taxes, and sales tax.
• Other benefits of 501(c)(3) status includes reduced postal rates and the ability to receive tax deductible contributions to better facilitate fundraising.

In short, there a number of benefits provided by incorporating as a non-profit. However, there are also some important considerations one must make prior to deciding to take this step.

Are there any drawbacks to non-profit status that I should be aware of?

The drawbacks involved with forming a non-profit can be surmised in three basics categories: loss of personal control, administrative costs and form-specific prohibitions. As for the loss of control, it is important to note that a non-profit corporation is still a corporation. As a corporation the CEO’s continued tenure with the company is at the pleasure of the board. Furthermore, a non-profit is not owned and controlled in the way a sole proprietorship or partnership is.

If the loss of personal control is not a concern, a careful assessment of the monetary and time costs associated with maintain a non-profit corporation should be thoroughly considered. Fees and costs can include:

• A $75 state incorporation fee.
• A federal filing fee of $400 or $850 if your organization will seek 501(c)(3) status.
• Likely subject to the annual reporting requirements New Jersey Department of the Treasury, Division of Revenue, and the New Jersey Office of Charities Registration
• Subject to a certified state audit once gross revenues exceed $500,000.

Certain goals and missions may be incompatible with certain corporate forms because of restrictions placed upon those forms. For instance, if your goal is to affect political change applying for 501(c)(3) status would be inappropriate and would hurt your organization’s ability to pursue its goals because 501(c)(3) organizations are strictly forbidden from political advocacy and other political endeavors.

What should I do next?

One of the most important things you can do is to discuss your mission and goals with other people who share your passion. Once you have discussed and refined your goals, seek an experienced professional who can guide your charity through the legal process and provide valuable legal insights. The Jayson Law Group handles formation issues, day-to-day legal concerns, and can address pending or active litigation. To discuss what the Jayson Law Group can do for your cause, organization or non-profit call 908-768-3633 or contact our firm online.