New York’s Not-For-Profit Corporation Law contains four different nonprofit categories – A through D. The Department of State decides what category a nonprofit falls under based on the purposes the organization lists in its Certificate of Incorporation.
Type A is the most general category. Type A corporations can be created for any non-business purpose. Athletic and social clubs, for instance, may be considered type A.
Type B organizations are created for charitable purposes. Scientific, literary, religious or other organizations may fall under this category.
Type C organizations are created for business purposes. Basically, Type C organizations are businesses owned by nonprofits, such as thrift shops. These businesses can be considered non-profits if the proceeds go toward a parent nonprofit, rather than toward private individuals or other for-profit corporations.
Type D corporations are created for other purposes determined by state law.
An important distinction between types is that A and C types are “membership” corporations, while B and D types may not be. Members may or may not be beneficial to a non-profit, depending on the corporation’s purpose. Generally, “members” are individuals within the community the nonprofit serves that, after meeting certain qualifying criteria, become eligible to vote on certain corporate decisions.
Stay tuned for additional posts on this subject. We will be posting more information about nonprofit membership and corporate governance in the near future. In the meantime, if you have any questions about nonprofit incorporation, choice of legal entity, or corporate governance, feel free to call the Law Firm of Vaughn, Weber & Prakope, PLLC at 516-858-2620 to schedule a free consultation.