- Mission Driven - The nonprofit has at its core a "mission." Typically a number of people come together because they are committed to a common mission and incorporating as a nonprofit gives them a way to organize around that mission. In doing so they become a public trust. As long as they live up to that public trust they can expect the public to support them. The mission differs from the exempt purpose of the organization which is the language required by legal documents. The mission is the public statement of why the organization exists.
- Tax Exemption – Once the nonprofit is incorporated by the state, it has the privilege of obtaining tax exempt status from the Internal Revenue Service by completing a lengthy application (Form 1023). In states having corporate income tax completion of the federal tax exemption process often automatically exempts the organization from state taxes. Obtaining this designation may exempt the organization from other taxes depending on the state and local governments. A primary one is real estate (property) tax. For organizations owning extensive real property as a means of accomplishing its mission this becomes a major reason for seeking tax exempt status. Some states also exempt nonprofits from paying sales tax. (It is important to check individual state revenue laws.)
- Receiving Donations – Many nonprofits depend on voluntary contributions to support their mission. While being subjected to increasing definition, scrutiny and restrictions, this has become a major reason for giving. Individuals and corporations can contribute and deduct it from their income. While there are exceptions, the vast majority of foundations require 501c3 status of applicants. Units of government granting support or purchasing services also usually require organizations to have this status to be eligible.
- Perpetual Life – Organizations have sought to "outlive" their founders and incorporating as a nonprofit creates an entity that has a life of its own. (Examples include YMCA, Boy and Girls Clubs, Red Cross, religious congregations, etc.)
- Employee Benefits –Increasingly, nonprofits have developed enough support for their missions to become employers. The organization has the ability to negotiate and purchase health insurance, disability insurance, liability insurance, pensions, etc.)
- Structure – The nonprofit sector (frequently called the third or social sector) has developed sophisticated structures that can be copied. These include articles of incorporation, bylaws, and minutes of meetings, board actions – all of which help an organization organize its work in a lawful and productive way. Without clear cut rules, procedures, policies a diverse group of people supporting the mission can become divisive.
- Personal Liability Protection – Protecting the participants (directors, officers, employees, and members) from personal liability is one of the primary reasons for incorporating. The corporation becomes the legal entity providing protection from creditors who can attach assets of the corporation but not the personal assets (bank accounts, real estate, and car) of the participants listed above. It is necessary to add that this protection is not absolute and there are significant areas of potential liability. (See How to Form a Nonprofit Corporation, 8th Edition by Anthony Mancuso (p 10) for major areas of potential personal liability and the FAQ on "Risk Management.")
- Other Benefits – Depending on the mission, type of activity or needs of the employees and volunteers there may be substantial benefits related to eligibly, taxation, training, free or discounted services. Anyone researching the reasons for incorporating should consult with an experienced group providing a similar mission to identify those benefits and their potential in achieving the mission.