INCORPORATING A NOT FOR PROFIT CORPORATION

by Eugene G. Berry, Esq.

Many individuals want to do good for others, but they do not have the resources. They often call us and ask us to establish a not for profit corporation also referred to as a non-profit corporation as a way to achieve this worthy goal and this is the general advice that we have given them over the years. First, there are for profit corporations like EXXON that are in business solely to make a profit. The not for profit corporation is in it to accomplish a charitable purpose. They can make a profit, but the accomplishment of a charitable goal rather than attaining profit is the prime motivation. UPMC is a non-profit that comes to mind that serves a charitable purpose, but makes a profit. Tax exemption is the ultimate goal but this does not mean the taxes are not paid or that there are no tax filings. There are many. Too numerous to address here.

The individual seeking to establish a not for profit should seek like minds and hearts who demonstrate a willingness to serve as volunteers, directors, officers and once funding is obtained employees. In the meantime the incorporator should be prepared to do it all. They should be lining up a team of consultants (Attorneys, Accountants, CPAs, Proposal/ Grant Writers, and a host of other professionals). They should assemble a proposed Board of Directors even before they begin the process of incorporation.

The incorporator will have to file articles of incorporation with the Pennsylvania Department of State, Corporations Bureau and will have to do the necessary Advertisements to be a legal entity entitled to operate in Pennsylvania. They will also have to undertake all of the registrations/filings required by the Bureau of Charitable Organizations, obtain state tax exemptions and obtain an Employer Identification Number (EIN). After your State Chartered non-profit operates for a time, develops budgets, programs etc. and raises funds, perhaps under another friendly non-profit’s umbrella, your non-profit will have to complete the onerous 1023 Federal Form which must be completed to obtain Federal 501 (C)(3) tax exempt status-the brass ring. Once you obtain the Federal Tax exempt status you can raise monies and the donors can get a deduction. Paperwork will be created and the paperwork can be overwhelming, but must be done.

This process is not for the squeamish and requires an understanding of business, knowledge of funding sources, knowing people who can make it happen, creating revenue raising techniques and being in contact with the people who know how to bring in the bucks and having on staff the people to do the things to achieve the very goals the non-profit was established to accomplish in the first place. This must all be done while taking care of the business side and the program side. This is not a simple task and my best advice is to first do your homework and learn all you can about your area of charity/service and then get a team of professionals who can help you through this process which will take your lifetime and others as well. Do not start this process if you do not have the passion and are not willing to do the impossible. By all means, get a lawyer!

Send any questions or comments to eugeneberry@berrylawassociates.net]

Eugene G. Berry, Esq.
Berry & Associates
Attorneys at Law
River Park Commons
2403 Sidney Street, Suite 245
Pittsburgh, PA. 15203
Phone: (412) 255-4445
Toll Free: 1-888-379-4545
Fax: (412) 255-6423