A Non-Profit (notice I left out corporation) is most commonly an organization that has obtained tax exemption under section 501(c)(3) of the IRS code by filing Form 1023. To qualify, the organization must be a corporation, community chest, fund, or foundation (a trust is a fund or foundation and will qualify), organized and operated exclusively for one or more of the following purposes:

•    Religious
•    Charitable
•    Scientific
•    Testing for public safety
•    Literary
•    Educational
•    Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment; however, see Amateur Athletic Organizations, later in this post)
•    The prevention of cruelty to children or animals.

It just so happens that many states, including Delaware, have a type of entity whose articles are designed to facilitate the application for tax exemption. Can you guess what that entity is called? That’s right, it’s the Non-stock Corporation. Do not confuse this with a Stock Corporation that has no authorized stock. Is that even possible? Yes. Even though it makes no sense, Delaware does allow Stock Corporations to file articles without authorizing shares of stock. It is rare but we have seen individuals accidentally file corporations this way. This error can be corrected, but it will cost you precious time and money!

A Delaware Non-Stock Corporation has no capital stock and is required to disclose its “non-profit” intentions in its articles of incorporation at the time of filing. It is typically used, but not exclusively, by organizations which plan to apply for tax exemption under section 501(c)(3) of the IRS code. Other applications of the Non-Stock Corporation may include civic leagues, labor organizations, business leagues, recreational clubs or other organizations that unify a common social goal; these organizations may be eligible for tax exemption under a different section of the IRS code. For more information on Tax-Exempt Status for your Organization check out IRS Publication 557. To form a Delaware Non-Stock Corporation for your non-profit organization, call us at 800-345-2677.