EFFECTS AND BENEFITS OF REGISTERING A NON-PROFIT
There have been countless reports of ghost-funding of non-existent non-profits. People cook up a non-profit name, get funding and disappear from the scenes. This is why funding companies have placed particular interest in the registration and legal recognition of non-profits. Looking away from funding, there are other effects of registration of non-profits as well as consequences of failing to register such entities. Becoming a nonprofit corporation requires some paperwork, but for many groups, the benefits of nonprofit status outweigh the complications.
The following are the benefits of registering your non-profit organisation.
a. Acquisition of a tax-exempt status. The Companies Income Tax Act (CITA)12 provides for tax exemption on the profits (so long as such profits are not derived from a trade or business) of any statutory or friendly society, co-operative society registered under any law, a company engaged in ecclesiastical, charitable, or educational activities of a public character, a company formed for the purpose of promoting sporting activities of a public character and trade union. This tax-exempt status can also be given by executive order. Additionally, The Federal Inland Revenue Service (FIRS) has issued a directive stating that all non-profit organisations are required to register with the nearest integrated tax office of the FIRS close to the place of operation or registered office of the non-profit organisation. Upon registration, a unique Tax Identification Number (TIN) is generated for tax purposes. It is also mandatory for every non-profit organisation to file its tax returns every year in the state where it was registered. However, non-profits are no exempted from paying Value Added Taxes on goods bought, except those acquired in connection with their humanitarian services. Without registration, your organisation would stand as every other unregistered body and be liable to pay all taxes due. This can also prevent the organisation from qualifying for some grants as a tax-exemption status is most times a prerequisite to accessing grants.
b. Legal Personality:
According to IncorporationRocket.com, one of the primary reasons so many nonprofits choose to incorporate is for the personal asset protection offered by the corporate veil. Essentially, this means that if your nonprofit is sued or defaults on a debt, your personal assets cannot be taken as payment.
c. Employee Benefit: By same source, Incorporated nonprofits can offer benefits to their employees, a privilege which is not available to nonprofit associations. This includes health insurance, pensions, and other benefits. These incentives can serve as a helpful draw for new employees, too.
d. Structure: Registering your nonprofit gives a formal structure to your organisation. For example, there is a board of directors, an advisory board, management, secretaries et al.
e. Perpetuity: Registering your nonprofit helps ownership of the organisation become a group venture. Even if the original owners die or leave the corporation, it will persist. In other words, the organisation will outlive you.