More than just attorneys.

Call Us Free: (866) 977-8754

What is the difference between the different categories of California Nonprofit Corporations?

The California Nonprofit Corporation Law (Corp. Code ss 5000 et seq.) divides nonprofit corporations into three main groups:

1.  Nonprofit Public Benefit Corporations
Public benefit corporations are corporations that are organized into two categories:
(a) organizations organized for charitable purposes, that plan to obtain state tax exempt status and/or federal tax exempt status
(b) organizations that act as civic leagues or social welfare organizations that also plan to obtain tax exempt status

Almost every public benefit corporation is prohibited from making any distributions of profits to its members, with a very limited exception for purchase of a membership in any limited-equity housing corporation.

2.  Nonprofit Mutual Benefit Corporations
Any corporation that is formed for any purpose other than religious, charitable, civic league, or social welfare purpose, that may or may not be planning to be tax exempt is a mutual benefit corporation.

The rules on distributions of profit for a mutual benefit corporation is outlined under the Nonprofit Mutual Benefit Corporation Law.   Common examples of mutual benefit corporations are social and neighborhood clubs, theater groups, business and trade associations, sports clubs, home owners associations, fraternities, and cemeteries.

3.  Religious Corporations
A corporation that is formed to operate a church or promote a religious purpose is a nonprofit religious corporation.  It is governed by the California Nonprofit Religious Corporation Law.

Need help forming your nonprofit?  Contact one of our attorneys for a free consultation at info@kerseysabawi.com or check out our affordable Business Formation Packages.

Leave a Reply