Planning Your Business

AE Works – Pittsburgh, PA

Nonprofit Corporations

Nonprofit corporations are those corporations whose members or shareholders may not receive any of the monetary profits of the corporation. A nonprofit corporation must be able to fulfill its purpose without financial benefit to its members, director or officers, except as salaries and expenses.

Many, but not all, nonprofit corporations have a charitable purpose. Charitable purposes are defined as the relief of poverty, the advancement and provision of education, including postsecondary education, the advancement of religion, the prevention and treatment of disease or injury, including mental retardation and mental disorders, governmental or municipal purposes, and any other purpose the accomplishment of which is recognized as important and beneficial to the public.

Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales tax exemptions. To qualify as exempt from federal income tax, a nonprofit corporation must meet the Opens in new windowrequirements set forth in the Internal Revenue Code.

To qualify as exempt from Pennsylvania Unemployment Compensation Tax, a nonprofit corporation must meet the requirements set forth in the PA UC Law. However, if the nonprofit corporation is liable for PA UC tax, they may qualify for the Reimbursable Employer option for PA UC tax.

Unincorporated nonprofit associations consist of two or more individuals who are joined together for a limited nonprofit purpose. Common examples include neighborhood associations, high school booster clubs, or groups raising funds for a specific cause such as helping an individual with medical bills. These types of nonprofits typically have limited income.

In Pennsylvania, unincorporated nonprofit associations are recognized as legal entities that can own and dispose of property. Members and managers are protected from personal liability, as all debts and liabilities are the sole responsibility of the association.

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