Each state permits people to form nonprofit corporations, also known as not-for-profit corporations. The main reason people form these corporations is to get tax-exempt status under the Internal Revenue Code (Section 501(c)(3)). To get tax-exempt status, the corporation must have been formed for religious, charitable, literary, scientific, or educational purposes.

If a corporation is tax-exempt under Section 501(c)(3), not only is it free from paying taxes on its income, but people and organizations who contribute to the nonprofit corporation can take a tax deduction for their contributions. Because many nonprofit organizations rely heavily on grants from public agencies and private foundations to fund their operations, attaining 501(c)(3) status is critical to success.

Tax-exempt status isn't the only benefit available to a nonprofit corporation. The nonprofit label seems to create an altruistic aura around the organization and the people running it. The message is "We're not in this for the money -- we really do love kids (or music or animals)." Also, an organization that plans to do some heavy mailing may be attracted by the cheaper postal rates that nonprofits are charged.

What kinds of groups should consider becoming nonprofit corporations? Here's a partial list:

• Child care centers
• Shelters for the homeless
• Community health care clinics
• Museums
• Hospitals
• Churches, synagogues, mosques, and other places of worship
• Schools
• Performing arts groups
• Conservation groups

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