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Non-Profit / Non-Stock Corporations

NON-PROFIT CORPORATION

A non-profit corporation, also referred to as a "not for profit" corporation, is a corporation that does not engage in a commercial or business enterprise for financial gain. Nevertheless, such a corporation may make incidental income or profit and thereby acquire a surplus or incidental reserves in carrying out its primary purpose.

A typical non-profit corporation is normally organized for charitable, civic, religious or other similar benevolent purpose. However, non-profit corporations are not limited solely to charitable related organizations; they may also include non-profit business corporations. A good way to determine if a corporation is non-profit is to ask, "Will the corporation be exploited for monetary gain?" If the corporation is to accept donations which the donors expect to submit to the IRS for tax credit, the corporation must qualify under Section 501(c)(3).

Characteristics of a Non-Profit Corporation

In a non-profit corporation, no dividends are paid and no part of the income of the corporation is distributed to its members, officers or directors with the exception of reasonable compensation for services rendered and distributions upon dissolution or liquidation. The motives, methods and operations of a non-profit corporation are generally set forth in its articles of incorporation.

In Delaware, the applicable provisions of the General Corporation Law apply to non-profit corporations as well as business corporations. See 8 Del. C. §§ 101, 102. Unlike normal business corporations however, non-profit corporations are generally tax-exempt organizations. Section 501(c) of the Internal Revenue Code provides a list of requirements that a corporation must meet if it wishes to qualify as a tax-exempt organizations.

NON-STOCK CORPORATION

A non-stock corporation, similar to a non-profit corporation, is one that is not organized for financial gain. 18 Am Jur 2d Corporations § 34. Rather, it is organized to provide a particular service to its members under a plan without any profit motive. Id. Nevertheless, members of a non-stock corporation have an interest in corporate property similar to that of stockholders in a regular corporation. Id. See also 8 Del. C. § 215 (voting rights, quorum and proxy requirements for non-stock Delaware Corporations).