Types of nonprofits

Types of nonprofits:

·         Unincorporated associations
·         charitable trusts
·         corporations

Advantages and disadvantages:

Unincorporated associations require less paperwork and are not as closely regulated or monitored by the IRS.  Laws have recently (1999) changed (see the UUNA Act) to protect unincorporated nonprofit founders from being personally sued as well as allowing them to hold assets such as property.  Before this law went into effect liability was one of the greatest disadvantages of not incorporating. It is difficult to receive tax-exemption without incorporation and nonprofits without exemption are not eligible for most grants. Charitable trusts can be recognized as tax-exempt, but they are at greater risk from personal liability Corporations require much more time, money, planning and organization.  Your organization will be completely under the control of an elected board of directors (or board of Trustees).  Founders are covered from personal liability.

Five Reasons to Incorporate – (source www.nolo.com)

1.     Your Association Makes a Profit From Its Activities
2.     You Want to Solicit Tax-Deductible Contributions (tax-deductible being the key word)
3.    You Want to Apply for Public or Private Grant Money
4.    You Want Protection From Personal Liability for the Group’s Activities
5.     Your Advocacy Efforts Might Provoke Legal Quarrels