What are the pros and cons of forming a non-profit corporation?
The biggest pro of all is that you can receive and you can be eligible to apply for tax exempt status with the IRS. That means that everything that you do and earn doesn't actually get taxed. So that's amazing and obviously that's a huge windfall, but that's the reason why the IRS has put that out there and allowed for it is because they want to encourage charities, companies, and corporations that are for the benefit of something other than lining your pockets. Some of the draw backs is the cost. Filing and upkeeping a 501 filing or a tax free filing requires a lot more time, and a lot more disclosure. There are many legal requirements and the application is quite laborious as well. There are some people that can help you out with those small business requirements. You can always go and see an attorney, and there are some online companies that can help you as well. In general you need to know what your appetite for upkeep on a corporation is. Additionally, even if you have a non-profit and you do a really good job of starting it, you've got to maintain it, and if you don't you could actually blow your tax free status. Doing something silly like taking a certain amount of money and using it more like a profit or keeping money in there can ruin the whole thing for everyone. So it takes very tight controls and you should have someone who understands accounting and someone who really understand how to run a non-profit organisation helping you. I think additionally, one of the pros is that you can take donations from people and you can market it. They will get a tax break so if you host a charity dinner and it's $100 a plate and the dinners were only $30, someone can get a $70 tax write off. Or for instance if you accept a donation of $100 the whole entire $100 can be a write off to the individual person, and obviously that has good tax ramifications for them.
