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Rajah Lehal

Not For Profit Doesn't Mean that the Books Don't Need to Balance!

October 28, 2015

Links from this article: Read the article here.

Not for profit corporations must make money to ‘stay in business’, but how the amount of surplus income and the purposes for which it is made is treated by tax authorities, may vary from jurisdiction to jurisdiction. The distribution/use of profits must comply with applicable corporate and tax legislation. The articles of incorporation must comply with applicable legislation. The author explains that not for profit organizations often have the idea that in order to be a non-profit they don’t have to make money. Non-profit organizations, like any business, have to make money. They have to be able to meet budgets, including payroll. If you own a business corporation, and there is money left over (quarterly, semiannually or annually) then, as the owner (shareholder), you can take some or perhaps all of that money as a bonus or distribution. In a non-profit organization, corporate ‘profit’ can only be used for corporate (not for profit) purposes, or ‘given’ to other not for profit corporations.

Read the article here.Take away:

  • If you own a business corporation, and there is money left over (quarterly, semiannually or annually) then, as the owner (shareholder), you can take some or perhaps all of that money as a bonus or distribution. In a non-profit organization, corporate ‘profit’ can only be used for corporate purposes, or ‘given’ to other not for profit corporations.
Corporation Type
Not for Profit Articles of Incorporation
Company Formation

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.