Florida Nonprofit Corporation
A Florida nonprofit corporation is a corporation that is formed to carry out a charitable, educational, religious, literary, or scientific purpose. A nonprofit corporation doesn’t pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives. The reason the nonprofit does not pay taxes is because the IRS and state tax agencies believe that the benefits the public derives from these organizations’ activities entitle them to a special tax-exempt status. In order to ensure you derive the IRS benefits, we suggest that you have a Florida nonprofit corporation lawyer draft your incorporation documents.
In Florida, the Florida Not for Profit Corporation Act states that a corporation may be organized under the act for any lawful purpose not, for pecuniary profit and not specifically prohibited to corporations under other laws of this state. The Act governs virtually all aspects of the organization and operation of Florida nonprofit corporations (FNPCs).
Formation of a Florida Non Profit Corporation
The first thing that must be done when deciding to incorporate a nonprofit organization is to decide whom will be on the founding board of directors of you nonprofit corporation. Florida requires that 3 or more members be on the board of directors.
The next thing you want to do is to select a name for your nonprofit organization. Care must be taken not to use the name of another for profit or nonprofit company or legal consequences may arise from the selection of the name. In Florida the corporation must contain one of eh following words: corporation, incorporated or its abbreviation.
We strongly advice that prior to filing the articles of incorporation, you have a business plan that will help you decide what type of language you place in the articles of incorporation, for the articles of incorporation will control major functions of the corporation.
The articles of incorporation need to include the basic following information: the name of the corporation, the nonprofit’s statement of purpose, provisions that will be required by the State of Florida and the IRS in order to have the corporation be accorded a tax exempt status, and the name and address of the registered agent. Note, as will be highlighted before, if members are to have voting rights in the corporation, this must be specifically stated in the articles or the members shall have no voting rights.
Care must be taken when submitting the articles of incorporation to include specific language that will ensure tax exempt status, 501 (c) (3). A clause that dedicates the nonprofit’s assets to another 501 (c) (3) nonprofit should your nonprofit end must be in the articles.
After filing the articles of incorporation or simultaneously, you should prepare bylaws that will comply with Florida Law that define the rules and procedures our corporation will follow for holding meetings, electing officers and directors, and for taking care of other corporate formalities. The bylaws are not filed with the Department of State, they are your company’s internal documents.
After you have filed your corporation, and you have your bylaws drafted, then you should hold your first meeting of the board of directors. In the first meeting, the board should approve the bylaws, appoint the officers of the corporation, set the accounting period and the tax year for the corporation, and approve the initial transactions of the corporation. The things decided in the meeting must be recorded after the meeting.
The next thing that must be done by the officers or directors of the corporation is to ensure that the corporation obtains its tax exempt status. To do this, the following three steps must be followed:
The corporation must file the federal tax exemption application. In order to obtain the exemption, the corporation needs to complete and file IRS Form 1023, Application for Recognition of Exemption Under Section 501(c) (3) of the Internal Revenue Code. The form requests a lot of information of the organization: its history, its finances, its organizational structure, its governance policies, its activities and some other things. Smaller nonprofits may not to be required to give the same information and may be able to submit a simpler application. The smaller nonprofits to qualify for this simpler application must inform the IRS that they believe that the corporations projected annual gross receipts will be less than $50,000 and that the total assets of the corporation are less than $250,000.00.
The corporation will also have to obtain a Florida state tax exemption. Upon your corporation acquiring its federal tax exemption, then the corporation will need to obtain its Florida state tax exemption. Exemptions that your corporation may obtain may include exemptions from income, property, sales, and other state taxes. To obtain your company’s state tax exemption you shall have to obtain the application form from Florida’s tax agency.
Your company may also have to be careful to meet other state reporting and registration requirements. For example, you may need to register with the Florida attorney general before doing any fundraising activities. Check with the Florida attorney general’s website for additional rules that may affect your corporation.
An FNPC may have one or more classes of members or may have no members. Members of a FNPC have no voting or other rights except as provided in the articles of incorporation or bylaws of the FNPC. Therefore, if you choose not to give the members of the FNPC the right to vote, then the articles and bylaws may be silent as to voting rights of the members or they may be written to explicitly state that the members have no voting rights.
If a FNPC intends to allow its members to have voting rights to one or more classes of its members for specific issues of the FNPC, then it is important to define the qualification for each class of members and the voting rights granted to each class of member. For example Members, members of a specific class can be given the right to vote on specific issues, such as the election of board members, the removal of directors, amendments to articles and bylaws, the sale or disposition of substantially all assets, plan of merger or dissolution, and plan of distribution of assets. Caveat, if the member voting rights are not placed or defined in the articles, then that is meant to mean that the incorporators named in the articles have complete control of the FNPC.
FNPC may not pay dividends or any part of the corporation’s income or profit of the FNPC to members, directors, or officers; however. FNPCs are authorized to pay reasonable compensation for services rendered and may confer benefits upon its members in conformity with its purposes.
Officers and Directors
FNPCs must have at least three directors. Directors and uncompensated officers of certain FNPCs which are recognized as exempt under 1110 §501(c) are immune from civil liability unless an action constitutes 1) a breach or failure to perform duties, and 2) the act is a knowing violation of criminal law, results in an improper personal benefit, or is reckless, committed in bad faith, or with malicious purpose. Most loans by an FNPC to a director, officer, or related entity are prohibited. Moreover, directors of FNPCs are required to disclose any conflicts of interest unless the director or FNPC can prove that the contract or transaction is fair and reasonable as to the corporation.
An FNPC must hold meetings as specified in the articles or bylaws; or in lieu of meetings, the directors may act by unanimous written consent, However, an FNPC’s failure to hold an annual meeting does not cause a forfeiture or give cause for dissolution of the FNPC, nor does failure affect otherwise valid corporate acts except in the case of a deadlock among the directors or members. An FNPC must maintain certain corporate records, the content of which depends on whether the FNPC is exempt from federal income tax under IRC §501(c). Finally, FNPCs are required to file an annual report, to pay a filing fee, and to maintain a registered agent.
The above is an introduction as to what is required to form a Florida Nonprofit corporation, yet this is just a small sample of the things that the corporate officers must comply with. There are other things that must be done with regards to the operation of the corporation that are beyond the scope of the above presentation and we suggest you have our nonprofit corporate attorneys help you prepare the documents required to ensure your corporation complies with all Federal and State Laws.