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Frequently Asked Questions

What are the implications of a nonprofit organization choosing not to incorporate?

The decision of a nonprofit organization to not incorporate can have significant implications. One of the primary consequences is the loss of federal tax-exempt status. This means that the non-profit will be required to report deductions, income, and losses. Furthermore, non-incorporated nonprofits forfeit the opportunity to apply for grant money, whether public or private, and property tax exemptions. They also cannot receive tax-deductible donations. Incorporation provides non-profits with a range of benefits, including tax exemptions and the ability to apply for grants and receive tax-deductible donations. Therefore, it is generally advisable for nonprofit organizations to incorporate to avail these benefits. Additionally, non-incorporated nonprofits may face challenges in obtaining an Employer Identification Number (EIN), which is essential for all legal activities of the organization, including hiring employees, opening bank accounts, filing tax forms, and applying for business licenses. The EIN is issued by the IRS and is similar to a Social Security number.
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