You can form a nonprofit organization (NPO) by filing articles of incorporation under the laws of the state where the organization is established. It should also be registered with the IRS to receive federal tax exemptions. After receiving the Employment Identification Number, the corporation can file Form 1023, which is for charitable organizations, or Form 1024 for other tax-exempt organizations, in order to receive tax exemption status.
You can also form a mutual benefit nonprofit corporation in the U.S. This kind of nonprofit corporation is chartered by the government of a state for the purpose of serving its members and can be formed by filing nonprofit articles of association. This type of corporation is not considered to be charitable organizations and are therefore liable to pay standard corporate tax rates.
All activities of a non profit corporation shall be carried out in accordance to its bylaws. Nonprofit bylaws are the set of rules by which the entity shall be governed and operated. Bylaws may generally contain the responsibilities of the corporation's officers and directors, the size of the board of directors and voting patterns, rules regarding conducting board meetings, and the allocation of funds.
A nonprofit organization enjoys limited liability similar to any other corporation. Usually, the acts of directors and officers are protected by the corporate status. This means that the liability of officers and directors towards business debts are limited. Such protection is essential for a nonprofit organization that deals with huge sums of money, real property, or enters into serious contracts. In case of a debt, the creditor will only have the option to attach corporate assets. The officers and directors can gain extra protection by obtaining a waiver and release of liability or by purchasing good insurance such as D&O (Directors and Officers) liability insurance.