| Nonprofit Organizations | |
| Although there are many different types of nonprofit organizations, the main type that could possibly be exempt from taxes is a nonprofit corporation. To become a nonprofit corporation, you must file articles of incorporation with your state office. Each state has different requirements; in Texas under the Texas Business Organizations Code (BOC), a nonprofit corporation is "a corporation [where]no part of the income of which is distributable to a member, director, or officer of the corporation." However, not every incorporated nonprofit can be exempt from taxes; you must file with both the IRS and your state comptroller to be considered for tax exemption. The IRS requires form 1023 or 1024 (depending on what filing status you are under). In Texas, the forms needed are AP-205 (charitable), AP-209 (religious), AP-206(homeowner's association), AP-207 (educational organization), AP-204 (all others). |
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| After all the filings are completed, you must come up with bylaws, budgets, a recording keeping system, and an accounting system. For most nonprofits, the IRS requires form 990 to be filled out each year. This form requires not only the basic information every corporation must provide per year (income statement, balance sheet), but additionally nonprofits are required to keep track of where money comes from and what programs or expenses the money is allocated to. A nonprofit that is unable to clearly depict where the money is coming and going may be subjected to an audit. If they fail the audit their nonprofit status could be taken away, and upper management personnel could be held liable. Given the complexity of the books, it is recommended to have someone with accounting experience handle the books. At nonprofit organizations, one of the troubles they come across is the difficulty involved in maintaining cash flow. Donations are mainly what they rely on but do not necessarily come in a steady stream. For this reason, many organizations have investments to generate more cash. What types of investments these organization decide to take part in are really up to the organization, but creating a more diversified investment portfolio may be better than just sticking with low risk investments such as CD's or bonds. We at Ashoka Lion can help nonprofits by not only maintaining the books, but also we can plan budgets, prepare reports as needed, and set up teams of professionals to address other issues. For more information on our services, please Contact Us. |
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| Disclaimer: The information on this page is not to be taken in place of the advice of a licensed professional. Please consult a licensed attorney and/or qualified tax specialist for help making decisions involving your nonprofit organization. | |
