If you think, “We’re not big enough to need to incorporate,” think again. Incorporation offers benefits for non-profit organizations, and if your association or organization has any dealings with the public regarding youth activities or sports, accepting donations or charging fees for events, then we recommend taking this step.
Here are four reasons to incorporate:
- Protect officers and directors from personal liability. In the case of a lawsuit against an organization, officers and directors can be held personally responsible in the absence of incorporation. When dealing with children, the organization also needs to have appropriate insurance in the event employees or volunteers are accused of misconduct with a child.
- Achieve tax exempt status with the IRS. When you’re incorporated, it’s easier to get federal tax-exempt status. Tax exemption provides a benefit to donors who want to take a tax deduction for financial or in-kind gifts to your organization.
- Ensure tax-exemption for local chapters. The tax exempt status of national or international organizations doesn’t always apply to local groups. Local chapters need to meet the reporting requirements of the IRS.
- Apply for grants. Grant money and corporate donations are often available for small groups, but the group must have tax-exempt status to qualify.
In Texas, you just need to fill out an application and submit it to the Texas Secretary of State. Our firm specializes in accounting and consulting for nonprofit organizations. You can read this blog to stay on top of financially-related issues facing nonprofits. To read more about our experience with nonprofit organizations, visit www.sstcpa.com.