New York State Not-for-Profit Corporation Laws

by Thomas King
New York charities must comply with federal and state laws.

New York charities must comply with federal and state laws.

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A not-for-profit corporation is formed for the common good, rather than to acquire profits. The defining features of a not-for-profit corporation include federal and state tax exemption as well as the absence of profits distributed to private individuals. Not-for-profit corporations in New York are subject to the rules of the Internal Revenue Service and New York state law.

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Certificate of Incorporation

The certificate of incorporation, referred to as the articles of incorporation in many states, is a legal document which acts as a constitution for your corporation. In New York, the certificate of incorporation includes such information as the name of the corporation, purpose for which the corporation is formed, type of corporation, county where the office of the corporation is located, names and addresses of at least three initial directors of the corporation, and name of the registered agent and his address. The name of the not-for-profit corporation must be distinguishable from the names of other business entities already on file with the Department of State. The purpose of the not-for-profit corporation should include information about why the corporation is being formed, what it intends to accomplish, who will benefit from the corporation and how the corporation will achieve its goals.

Board of Directors

The board of directors is largely responsible for the actions of the corporation. The board does not run the day-to-day activities of the corporation; rather, the board provides support at a macro level. For example, the board may oversee budgeting and fundraising, make policy decisions and evaluate programs. Board members have three basic legal duties: care, loyalty and obedience. In general, the duty of care means that board members must act as a reasonable person would. This includes attending board meetings and reviewing important documents. The duty of loyalty means that board members must act in the best interest of the corporation. For example, members must alert other members of opportunities that might benefit the corporation before taking advantage of the opportunity personally. The duty of obedience means that board members must make sure the corporation is in compliance with all applicable laws.

Bookkeeping

A not-for-profit corporation must keep complete records of the board of director meetings. These records must be kept at the office of the corporation listed on the certificate of incorporation. Moreover, any individual who has been a member of the not-for-profit corporation for at least six months is entitled to review these records, in person or through his agent or attorney.

Tax Exemption

One of the major perks of forming a not-for-profit corporation is that the corporation may be eligible for federal and state tax exemption. To be eligible for federal tax exemption under 501(c)(3) of the Internal Revenue Code, the corporation must be operated for an exempt purpose. These include charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. Moreover, the corporation must not distribute profits to those who control the corporation. Finally, the corporation must not be organized for a political purpose. In other words, the corporation must not participate in campaign activity for or against a political candidate and a substantial part of its activities may not involve influencing legislation. The requirements for tax exemption under New York State law mirror those under federal law. However, in addition to filing IRS Form 1023 for federal tax exemption, you must file Form CT-247 with the New York State Department of Taxation and Finance for state tax exemption.