Becoming a recognized IRS non profit charity or organization in MN is not easy. It does take some time, the collection of documents, financial information as well as developing Articles of Incorporation and bylaws.
It also means that the organization will be run by a board that is governed by those bylaws. This means the need to recruit board members from the general membership or the community on a regular basis as outlined in the bylaws under the allowed time periods for board members to serve.
The Advantages
However, there are a lot of benefits to becoming an IRS non profit in MN. The biggest advantage for most charities and charitable organizations is that it provides an exemption from federal taxes and state taxes as well as allows for tax-deductible contributions and tax-exempt financing.
Not all organizations are considered to be IRS non profit. There are strict regulations about the type of organization that is limited to educational, religious, charitable, scientific, literary or that provides specific services as defined by the IRS.
What it Limits
Once the charity or other approved organization has IRS tax-exempt status, there are some things that it cannot do. For example, the organization cannot engage in lobbying or in any type of political activity. This doesn’t restrict individual board members as long as they are not representing themselves as “speaking” for the non profit.
Additionally, the board must be careful not to receive any private benefit from the non profit. This is an absolute prohibition so shareholders or members cannot be paid from the organization’s net earnings.
It is important to recognize that not all IRS approved non profit organizations will be tax exempt. However, it is typical that most organizations will strive to become both tax exempt and nonprofits.
