California Non-Profit 501(c)(3) San Diego
California Non-Profit 501(c)(3) San Diego Summary
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• Be viewed as more legitimate to potential donors and other sources of funding;
• Receive donations tax free while providing your donors valuable tax deductions;
• Raising capital through privately and publicly funded grants;
• Draw a reasonable salary, allowing you to focus on your philanthropic work full-time.
All California non-profit corporations formed by San Diego Corporate Law include attorney-drafted articles of incorporation, bylaws, federal EIN application, corporate records book, and minutes for the organizational meeting of the board of directors.
California non-profit corporations formed by San Diego Corporate Law may apply for 501(c)(3) or other tax-exempt status include the application to the Internal Revenue Service, California Franchise Tax Board, and California Attorney General’s Registry of Charitable Organizations.
Tax Exempt 501(c)(3) Non-Profit
Low Revenue 501(c)(3)
California Non-Profit 501(c)(3) San Diego Details
The most common organizational structure for a non-profit is the corporation. There are three main types of non-profit corporations: (1) public benefit, (2) mutual benefit, and (3) religious corporations. Each California non-profit corporation type has distinguishing characteristics, but the three also share many common features. By filing articles of incorporation and paying the required $30 fee to the Secretary of State, one or more persons may form a California non-profit corporation. California Corporations Code §§ 5120(a), 7120(a), 9120(a); California Government Code § 12186(d). After filing articles of incorporation, bylaws must be adopted to structure internal governance and provide notice to directors regarding the law governing the California non-profit corporation. California Corporations Code §§ 5150-5151, 7150-7151, 9150-9151. A California non-profit corporation may be dissolved voluntarily by an affirmative vote of the members, if any, or the directors. California Corporations Code §§ 6610, 8610, 9680.
The California non-profit corporation form is an established and well-understood entity governed by clear statutory norms in areas such as permitted activities, director and member liability, director standards of conduct, indemnification of agents, and internal governance.
California non-profit corporations have the power to purchase property, enter into contracts, carry on a business, and issue memberships. California Corporations Code §§ 5140, 7140, 9140. The board of directors of a California non-profit corporation has control of the direction of management and the exercise of corporate powers. California Corporations Code §§ 5210, 7210, 9210.
Members, directors, and officers of California non-profit corporations are indemnified from personal liability for the non-profit’s debts, liabilities and obligations. California Corporate Code §§ 5350(a), 7350(a), 9350(a). If a director, officer, or trustee of a California non-profit corporation is uncompensated, he or she may be protected from liability. California Corporations Code §§ 5047.5, 5239, 7231.5, 9247; and §§9.115-9.120. Directors of California non-profit corporations performing duties in accordance with the statutory standard of care are not liable for any alleged failure to discharge directorship obligations. California Corporations Code §§ 5231(c), 7231(c), 9241(d).
California non-profit corporations may also choose to indemnify directors and officers from litigation expenses under certain statutory conditions. California Corporations Code §§ 5238, 7237, 9246; and §§9.156-9.162.
The cost and time required to comply with government filing requirements, the observance of corporate formalities, and the regulations limiting non-profit activities are disadvantages of forming a California non-profit corporation. However, unless the proposed non-profit organization is extremely small, these disadvantages are outweighed by the advantages of the non-profit corporate form.
Non-profit vs. Tax Exempt
The terms “non-profit” and “tax exempt” or “501(c)(3)” are often used interchangeably, although use of these terms as synonyms is incorrect. Most California non-profit corporations are eligible to apply for tax-exempt status, such as 501(c)(3) status, and many California non-profit corporations will benefit from tax-exempt status, such as 501(c)(3), but certain businesses operated by California non-profit corporations are not eligible for tax-exempt status.
Tax Exemption Categories
Under Internal Revenue Code § 501(c) there are twenty-eight different categories for tax-exempt status, and most of these are provided tax exemption by the State of California under California Revenue and Taxation Code § 23701.
The most frequently used categories are for charities, social welfare and lobbying, labor unions, trade and business associations, social clubs and veteran’s groups. Internal Revenue Code §§ 501(c)(3), 501(c)(4), Internal Revenue Code § 501(c)(5), 501(c)(6), 501(c)(7), 501(c)(19). Most of the income and donations received by these organizations are exempt from taxation.
Donors to certain tax-exempt organizations, especially those exempt under Internal Revenue Code § 501(c)(3), may offer personal tax deductions to donors for contributions given. When available, these personal tax deductions may act to significantly stimulate donor contributions.
Burdens on Tax-Exempt Non-profit Operation
The potential costs and regulatory burdens of tax-exempt operation under 501(c)(3) and other tax exemptions should be considered before applying for exempt status. The tax-exempt status alone is costly and may consume a great deal of non-profit resources. Tax-exempt organizations, such as a 501(c)(3), also must frequently prepare filings and reports and are subject to public inspection. Tax-exempt organizations under 501(c)(3) and other tax exemptions are commonly subjected to tax and other government audits. California non-profit corporations having obtained 501(c)3) or another tax exemption face numerous restrictions on activities, management, control and asset allocation and sources.
Table of Available Tax Exemptions
|Description||Federal Exemption||California Exemption||Deductions Tax Deductible?|
|Corporation formed and granted exemption by Act of Congress||501(c)(1)||None Required||Yes, if for exclusively public purposes|
|Corporation that holds title to property for another exempt organization||501(c)(2)||23701h||No|
|Organizations organized and operated exclusively for purposes that are charitable, religious, scientific, testing for public safety, literary, educational, fostering amateur sports competition, or preventing cruelty to children or animals||501(c)(3)||23701d||Yes|
|Social welfare organizations (includes organizations that lobby substantially); local associations of employees||501(c)(4)||23701f||No|
|Labor, agricultural, or horticultural organizations||501(c)(5)||23701a||No|
|Business leagues, chambers of commerce, real estate boards, trade associations, and professional football leagues||501(c)(6)||23701e||No|
|Fraternal societies that provide insurance or similar benefits to members||501(c)(8)||23701i||Yes, if limited to charitable purposes|
|Voluntary employees’ beneficiary associations (VEBAs)||501(c)(9)||23701l||No|
|Fraternal societies that do not provide insurance to members||501(c)(10)||23701j||Yes, if limited to charitable purposes|
|Teachers’ retirement fund associations||501(c)(11)||None||No|
|Local benevolent life insurance associations, mutual ditch or irrigation companies, and cooperative telephone companies||501(c)(12)||23701c||No|
|Credit unions and mutual insurance funds||501(c)(14)||23701z||No|
|Certain small insurance companies||501(c)(15)||None||No|
|Corporations that provide crop financing||501(c)(16)||23701n||No|
|Supplemental unemployment benefit trusts||501(c)(17)||23701s||No|
|Certain pre-1959 employee funded pension plans||501(c)(18)||23701w||No|
|Veterans’ organizations||501(c)(19)||None||Yes, in certain cases|
|Group legal services plans||501(c)(20)||None||No|
|Black lung benefit trusts||501(c)(21)||None||No|
|Certain ERISA trusts||501(c)(22)||None||No|
|Certain organizations that provide insurance to veterans||501(c)(23)||None||No|
|Certain Other ERISA Trusts||501(c)(24)||None||No|
|Certain title-holding corporations||501(c)(25)||23701x||No|
|Membership organizations that provide medical insurance for the difficult to insure||501(c)(26)||None||No|
|Certain state-formed workers’ compensation organizations||501(c)(27)||None||No|
|National Railroad Retirement Investment Trust established under 45 USC §231n(j)||501(c)(28)||None||No|
|Religious or apostolic corporations||501(d)||23701k||No|
The Low Revenue 501(c)(3) quoted for $3,875.00 assumes IRS Form 1023EZ may be filed instead of IRS Form 1023 to obtain the federal tax exemption.