In a market-based economy, focused on bottom-line and profit, the Non-Profit Organization plays a pivotal role. This is partly because for-profit corporations are separate entities with a legal duty to make money for their shareholder, who want the maximum return on their investment. Stock values rise and fall between the interplay of net profits and ROI rather than the donations made by the corporate entity. Therefore, depending on the agenda by the founder or the board (i.e., the Gates Foundation), a much greater and grander purpose can be served through the creation of a non-profit organization.

With its roots in philanthropy and volunteerism, non-profit organizations now encompass much broader scopes and goals. The federal tax exemption applies to non-profits formed for social welfare groups, trade associations, political action committees, paternal organizations and more. Structurally, they are created in the state of your choosing, with Delaware providing the most benefit, and then approved by the IRS through federal laws. They can be formed as corporations, or as trusts, the latter providing a bit more privacy. Under either form, there are several rules that must be complied with to maintain the tax exempt benefit: shareholders or directors must not receive funds directly; No political activity and limited legislative activity; and remaining assets after dissolution must be disbursed to a charitable entity. Additionally, the non-profit organization must fall within six categories: Assisting the poor, advancing education/science, advancing religion, promoting social welfare of the community, and promoting health. The non-profit organization can provide reasonable compensation for its administration, which may be taxed if the IRS deems it excessive. The board should be comprised of volunteers.

If you are considering a non-profit to further your personal or business agenda, consult an attorney who can help you build the appropriate structure to reach your goals!