What type of legal structure should a nonprofit have?

A nonprofit organization operating in Washington should choose a legal structure that best fits its needs and goals. The most common types of nonprofit legal structures include corporations, unincorporated associations, tax-exempt trusts, and charitable trusts. Corporations are formed to run a business, with profits distributed to shareholders. Unincorporated associations are voluntary agreements between two or more persons created for a common cause. A tax-exempt trust is a legally-recognized agreement between a trustor and a trustee that allows the trustor to pass assets to the trust without being taxed on those assets. Charitable trusts are established to benefit a particular charity or charities. In addition to the four primary structures, Washington nonprofits may also consider limited liability companies or limited partnerships. Limited liability companies (LLCs) are designed to protect members from potential legal and financial liability and as a result, LLCs’ income is taxed at the individual rather than corporate level. Limited partnerships (LPs) are similar to LLCs but are for businesses that require or plan to conduct business with executive and limited partners. Each of the structures have strengths, weaknesses, and different legal implications. It is important to consult with a lawyer or accountant to determine which is best for the circumstances of the nonprofit. Ultimately, the structure chosen should fit the mission and goals of the nonprofit organization.

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What type of legal structure should a nonprofit have?

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