Forming a Nonprofit Corporation Creating a nonprofit corporation is not a lengthy process, but certain legal requirements may make it complicated. Therefore, it is important to consult an attorney prior to formation. While the Attorney General's Office is not authorized to provide legal advice to private individuals or organizations, the following information may be helpful. Before forming a nonprofit corporation, it is important to determine the purpose and goals of the organization in order to evaluate the advantages and disadvantages of operating as a nonprofit rather than a for-profit organization. One of the primary advantages of forming a nonprofit corporation is the ability to receive tax-deductible contributions in the form of public and private grants and private individual donations. The IRS Publication 557, Tax-Exempt Status for Your Organization, discusses the rules and procedures for organizations wishing to obtain recognition of exemption from federal income tax. Go directly to the IRS web site to obtain a copy of Publication 557 www.irs.gov/bus_info/eo/index.html The obligations of nonprofit corporations and the restrictions placed upon them, however, are critical. Federal and state laws require certain filings and may, in some cases, require payments for nonprofit corporations at their inceptions and on an annual basis. Also, nonprofit corporations do not allow pecuniary gain (profit) to any person. This means that while a nonprofit corporation can pay a reasonable salary for services performed, it cannot pay dividends or profits to members or other individuals. Furthermore, if and when the members or directors choose to dissolve the corporation, the remaining assets must be transferred to another charity that has a similar purpose. Once the final decision to form a nonprofit corporation is made, there are several basic steps that should be followed to create the corporation and begin operating. Some of these steps are summarized below:
b. annual reports with the New Mexico Attorney General's Office, unless the corporation is exempt from such a filing; c. annual corporate reports with the Public Regulation Commission. The above information is intended to provide a brief overview of how to form a nonprofit corporation. Please remember that this information and the resources provided are not a substitute for professional legal assistance. An attorney and/or tax expert should be consulted when forming a nonprofit corporation.
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