Non-Profit Organization
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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

312-906-5041

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Chicago Tax-Exempt Organization Attorneys

chicago illinois not-for-profit tax lawyer

Non-Profit Formation and Compliance in Illinois

Non-profit organizations are similar in structure to regular corporations, the main difference being that they are incorporated for the purpose of serving the public good rather than turning a profit. With that said, there is nothing preventing a non-profit from generating a revenue stream. They just cannot pass any net revenue along (in the form of a profit) to the individuals who control the organization. Reasonable salaries can be paid, and of course revenue can be used to cover operating expenses, but nothing can be paid out to employees or officers beyond the salaries earned for their work within the organization.

Forming a non-profit and maintaining compliance with the IRS can be quite complicated and often requires the assistance of a tax professional. At the Tax Practice of IIT Chicago-Kent College of Law, we provide an affordable solution to those setting up a non-profit on a budget, without sacrificing the competent guidance you need. Under the direction of Chicago tax attorney and Professor Jonathan Decatorsmith, we help clients correctly structure their not-for-profit organizations as well as providing ongoing support to keep your entity from running into any trouble with the IRS.

The Internal Revenue Code (IRC) allows 29 classifications of non-profit entities that are eligible for tax-exempt status under the 501(c) designation. The most common organization is known as a 501(c)(3); these organizations can receive tax-exempt status if they are created for charitable, religious, educational or scientific purposes. There are also a fair number of 501(c)(4) and 501(c)(6) organizations that are tax-exempt for the purpose of conducting political activity. Other 501(c) entities include social clubs, labor unions, credit unions, mutual insurance companies and many others.

Formation

In general, a non-profit has the same essential structure as a for-profit corporation; there are the founding members that set it up, the board of directors that provide general direction, the managers that run the day-to-day operations, and the employees that do the bulk of the work. Non-profits may also have an additional class of people known as members who work for the organization and often take on temporary leadership roles. Members are not necessary; any given non-profit may use a membership structure (or not) as it befits their mission.

Non-Profits and Taxation

Even for a tax-exempt non-profit entity, there are some substantial tax-related issues to deal with. For example, if your organization makes any amount of money through the use of profit-generating processes not related directly to its central mission, that unrelated business taxable income is, as the name implies, taxable. In addition, a tax-exempt non-profit must still file a tax return if its yearly income is $25,000 or more and must file a complex tax return if its yearly income exceeds $250,000.

There are many other complications behind the formation, tax issues, and regulatory compliance of non-profit organizations. For expert assistance on a full range of non-profit related matters, contact the Tax Practice of IIT Chicago-Kent College of Law today at 312-906-5041 for a free consultation.

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