The corporation is the most common, and best, form for a nonprofit organization. Here are some of the benefits:
PROTECTION FROM LIABILITY
The officers, directors, and members of a nonprofit corporation are protected, in most cases, from liability for the debts and obligations of the corporation. If the corporation incurs debts or if someone is injured by a member of the corporation, the others in the organization normally would not be personally liable. There are exceptions to this, however. If the officers or members personally guarantee the debt, or if they cause the injury, they will be liable.
ELIGIBILITY FOR GRANTS
Many government and private programs can only make their grants to organizations which are incorporated.
PROCEDURAL RULES
When an organization incorporates, it is then governed by state incorporation law. This law usually answers all of the issues that come up in such an organization, such as how many directors there must be, what is a valid quorum, and what are the rights of members. If the organization is unincorporated, it must make up its own procedures for all of these types of contingencies.
There is a price to pay for these benefits, but it is well worth it. The price is that the organization must register with a state and must make periodic filings and disclosures. There are also filing fees, but these are usually small. If professionals are retained to prepare these documents, the cost may be high, but this is not necessary for small groups whose affairs are not complicated.
