Research Paper: How to Start a Non-Profit

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[. . .] Any changes in the contact number and address of the existing statutory agent shall also be updated with the office of the secretary of state. Furthermore, the office of the secretary of state shall also be informed about the death of the statutory agent as well. (Members of the Secretary of State, Government of State of Ohio, 2014)

Legal Forms and Tax Laws

Not for profit organizations can take a variety of forms depending on the country within which they exist. In France, these organizations can take the forms of law and practice recognize associations, fund-raising committees, foundations, corporations of public interest, community service organizations, public benevolent institutions and limited companies. The organization adapts a form that best suits its mission and objectives. This form is generally selected through the deployment of a risk based approach. (Staff Members of the Financial Action Task Force, 2013)

The French Law generally exempts all the not for profit organizations from various commercial taxes including income tax, professional tax, corporate tax and turnover tax. Special conditions and rules, however, apply to value added tax. The income from economic activities of not for profit organizations is exempted from commercial taxes only if the income is not distributed among the members as profits and the other characteristics and factors distinguish it from other commercial activities. (Staff Members of the Council on Foundations, 2014)

According to the 261, 7.1 of the Tax Law, any not for profit organization that has annual revenue of more than €60,000 will be exempted from tax if:

The disinterestedness factor, which means that the administration and management of the organization does not have any financial interest in the organization. (Staff Members of the Council on Foundations, 2014)

The not for profit organization does not compete with the commercial organizations. If the organization is observed to compete with the organizations in the commercial sector then it must be concluded by an inquiry that the organization does not conduct its activities in the manner that is similar to the manner in which the commercial organizations conduct their activities. (Staff Members of the Council on Foundations, 2014)

The not for profit organization must conduct its activities in a manner that is alignment with the '4 P. rule' that is stated by the 1998 Tax Instruction:

The product offered by the not for profit organization satisfies a need that is not satisfied by the private sector. (Staff Members of the Council on Foundations, 2014)

The public is not able to afford the good that is being offered by the private sector. (Staff Members of the Council on Foundations, 2014)

The prices of the goods or services that are offered by the not for profit organization is lower than the prices of the goods and services that are offered by the private sector. (Staff Members of the Council on Foundations, 2014)

The promotion of public interest shall not be done through the deployment of the advertisement and marketing tools that are similar to the advertisement and marketing tools that are deployed by private sector. (Staff Members of the Council on Foundations, 2014)

According to Article 206, 1 bis, of the Tax Code, a not for profit organization, which has a revenue of lower than €60,000 will qualify to be exempted from tax only if the primary and principal activities of the organization are not for profit in nature and the organization does not distribute and of its proceeds, assets and incomes among the members for the sake of their private interest. (Staff Members of the Council on Foundations, 2014)

The legal forms and structures that can be adapted by the not for profit organizations in the United States of America are similar to those that can be adapted by the not for profit organizations in France. These structures include law and practice recognize associations, fund-raising committees, foundations, corporations of public interest, community service organizations, public benevolent institutions and limited companies. The selection of the form or structure depends on the objective or goals of the organization. The organizations can select any form that best suit their goals and objectives. There are no stringent rules in relation to the selection of the form or structure of the not for profit organizations. (McNamara, 2014)

Whether a not for profit organization chooses to be incorporated or not it would gain a tax exempt status from the federal government. There a number of tax exempt statuses for the not for profit organizations, but the most preferred tax exempt status in the United States of America is the 501 (c) (3). This is a section of the IRS that only exempts the not for profit organization from the federal taxes but also makes positive contributions to the portion that is regarded as tax deductible from the amount received from a donor. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

In addition to that, the other sections of the tax code, including section numbers 501 (c) (4) or 501 (c) (6), also provide the not for profit organizations with exemptions from income taxes. These sections, however, do not allow the donors to deduct their contributions. This is why section number 501 (c) (3) is regarded as the most favorable tax exempt section for the organizations that qualify. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

The groups eligible for the tax treatment under section number 501 (c) (3) are the groups that are created for special and particular exempted purposes. These qualifying organizations include religious organizations, scientific organizations, charitable organizations, educational organizations and the organizations created for literary purposes that provide evident benefits to the general public. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

The organizations that have not been incorporated, also referred to as the unincorporated associations, can also be eligible for tax treatment under section number 501 (c) (3) if they fulfil all the necessary requirements. The organizations that do not qualify for the tax treatment under section number 501 (c) (3) become eligible for tax treatment under the other sections of the tax code. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

In order to gain the status of 501 (c) (3), it is necessary for an organization to file an application with the IRS and then get it approved. It is necessary for the organization to submit certain additional documents with the application. These documents include the articles of incorporation and bylaws. This is done to prove that the organization is involved in one or more not for profit or charitable activities in real terms. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

In most of the states in the United States of America, when a not for profit organization gains an exemption from the federal taxes then this indicates that it has gained an exemption from the state taxes as well. The word 'tax exempt organization', therefore, refers to an organization that is exempted from the federal as well as the state level taxes. (Dirusso, 2011; Staff Members of the P-Brain Media, 2014)

Not for Profit Universities in France

There have been radical changes in the higher education market throughout the globe and the private as well as the not for profit organizations have been performing their operations on order to fulfil the demand for education. (Staff Members of the International Institute for Educational Planning, 2007) The following section discusses the functioning of a not for profit university in France:

Role of Ministry of Education

In France, at the state level, the ministries that are responsible for initial and continuous vocational education are the ones that are responsible for school and higher education. The Ministry for National Education is responsible for the appropriate functioning of the not for profit universities in France. (Staff Members of the Ministry of Education - Directorate of School Education, Government of France, 2010) In this context it performs the following functions:

It draws up the courses for various diplomas. While performing this duty the Ministry for National Education takes into account the advice of various professionals. (Staff Members of the Ministry of Education - Directorate of School Education, Government of France, 2010)

In addition to that, the examination rules are set up by the Ministry for National Education. furthermore, the ministry also awards the degrees and diplomas. (Staff Members of the Ministry of Education - Directorate of School Education, Government of France, 2010)

The teachers are recruited, trained and paid under the supervision of the ministry. In addition to that, it appropriately monitors the performance of the teachers as well. (Staff Members of the Ministry of Education - Directorate of School Education, Government of France, 2010)

The universities are accountable to the Ministry for National Education for the results that are produced and the resources that are deployed by the not for profit universities. (Staff Members of the Ministry of Education -… [END OF PREVIEW]

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How to Start a Non-Profit.  (2014, July 15).  Retrieved May 24, 2019, from https://www.essaytown.com/subjects/paper/start-non-profit/6721015

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"How to Start a Non-Profit."  Essaytown.com.  July 15, 2014.  Accessed May 24, 2019.
https://www.essaytown.com/subjects/paper/start-non-profit/6721015.