Delaware Non-Stock (Non-Profit) Corporations
A Delaware Non-Stock Corporation is controlled by one or more Members instead of stockholders. The Non-Stock Corporation Bylaws control membership, election of Officers (President, Secretary and Treasurer) and the operation of the Corporation. IncNow will provide the Certificate of Incorporation and the Bylaws for a Member-owned and operated Delaware Non-Stock Corporation.
Delaware Non-Stock Corporations are typically used for non-profit activities in Delaware or may qualify to conduct non-profit activities in other states or countries.
The Certificate of Incorporation for the Non-Stock Corporation we offer specifies it is a “Not for Profit Corporation”. The Certificate of Incorporation does not have to specify the specific non-profit activity, but typical activities are civic associations, community, social or sports organizations.
Section 501(c)(3) and Tax Implications
A Non-Stock Corporation is not taxable on its income provided it obtains a tax exempt Letter of Determination from the Internal Revenue Service (IRS). When the Non-Stock Corporation applies to the IRS for a tax exemption on Form 1023, the Certificate of Incorporation has to include specific provisions required by the IRS. IncNow includes this tax exemption language on your Certificate of Incorporation by default in our “Non-Profit Corporation” package. For comparison, the forms available on the Division of Corporations website and through the websites of many other incorporation services do not include such provisions for tax exemption.
In order for donors to take tax deductions for their contributions, you will need to file the Form 1023 for the Section 501(c)(3) charitable organization tax determination letter from the IRS.
An application on IRS Form 1023 needs to be filed after you incorporate with IncNow to obtain tax exemption for a Delaware Non-Stock Corporation formed for general charitable, educational, scientific or religious purposes. Such IRS tax exemption determination will be retroactive to the date of incorporation if the IRS Form 1023 is filed within 15 months of the incorporation date.
A Delaware Non-Stock Corporation with or without the IRS tax exempt determination is governed by the Delaware General Corporate Law. If the Members vote to dissolve the Delaware Non-Stock Corporation, its assets will be distributed to another Section 501(c)(3) charity.
A Delaware Non-Stock Corporation is exempt from paying the Annual Delaware Franchise Tax (currently $175) if its Certificate of Incorporation states it is either organized “not for profit” or organized for an Internal Revenue Code Section 501(c) tax exempt purpose. The only State of Delaware fee is an annual $25.00 filing fee.
Delaware volunteer directors of non-profit corporations have statutory protections from fiduciary liability, unless their actions are reckless.
While one person can be the sole member and director of a Delaware non-stock corporation, usually the IRS expects three directors to approve the 1023 tax determination letter application.