Overview of Nonprofit Corporations
Under the Pennsylvania Nonprofit Corporation Act, nonprofit corporations may be created for any lawful purpose, other than generating profit. Although profit can be generated as part of business operations, profit must not be paid out to any shareholder, member, officer or employee beyond reasonable compensation for their services. Most nonprofit corporations are created to further a charitable, religious, educational or scientific purpose. A benefit to organizing a business for these purposes is eligibility for federal 501(c)(3) tax-exempt status from the Internal Revenue Service. This status provides federal income tax relief to the organization and tax deductions to its donors. This status also allows the nonprofit to pursue state corporate income and sales tax exemptions, as well as local property tax exemptions.
Articles of Incorporation
The Act requires that every nonprofit corporation file Articles of Incorporation with the Pennsylvania Secretary of State. These are the functional equivalent of a constitution for the business, and the law requires that the document contain certain information. For example, you must include the name of the corporation, which must not be the same or deceptively similar to another business operating in Pennsylvania, and a street address. You must also include the business purpose and a statement confirming that the corporation will not contemplate generating profits. The Articles must also specify whether the life of the corporation is for a certain limited period or if it is perpetual in nature.
The Pennsylvania Nonprofit Corporation Act also requires your nonprofit corporation to publish the Articles of Incorporation, as filed with the state, or to publish an intent to file the Articles, in two newspapers of general circulation, with one being a legal journal. For convenience, the Pennsylvania Department of State provides a list of legal journals, organized by county, on its website. If you are publishing an intent to file, the filing needs to include the name of the organization and a statement of the organization's intent to be formed in accordance with the Act. The Act does not require you to submit proof of the advertisement to the department, but this should be noted in the corporation's minutes.
After the articles have been filed and the advertisement has been published, the Act requires your nonprofit to hold an organizational meeting. The purpose of the meeting is to adopt the corporate bylaws, which set forth the internal rules and procedures for the corporation. There is no set rule for creating the bylaws, but they typically address the size of the board of directors, how the board is elected and the procedure for calling a meeting. In addition, nonprofits often include a conflict-of-interest policy, which states that no member may personally gain from the actions of the nonprofit. If there are no directors at the time of the organizational meeting, the Act requires that directors be elected in accordance with the procedure outlined in the bylaws.