The Three Categories of Non-Profit Corporations

The Three Categories of Non-Profit Corporations By The Startup Garage
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Non-profits that choose to incorporate are classified into one of the following three categories.  The chosen category must be stated on the Articles of Incorporation that are submitted to the state for filing.  The three differ from one another primarily in stated purpose, how their assets can be distributed, and the amount of regulation.

Public Benefit Corporations

  • A public benefit corporation may be formed for either a charitable or a public purpose, may not distribute assets to members or directors, and are subject to the most extensive regulation.
  • A public benefit corporation may apply for a federal tax exemption as a 501(c)(3).  For more information on which public benefit corporations qualify under 501(c)(3), please read our blog post entitled Considering 501(c)(3)? Charity vs. Charitable.

Mutual Benefit Corporations

  • A mutual benefit corporation may be formed for any lawful purpose, may distribute assets to members or directors upon dissolution and are subject to less extensive regulation than a public benefit corporation.
  • A corporation with a public benefit or charitable purpose may file as a mutual benefit corporation to avoid the amount of regulation a public benefit corporation is subject to, but only if the corporations’ assets are not dedicated to a charitable, religious or public purpose.  Additionally, if a non-profit corporation wishes to file for a 501(c)(3) tax exemption, they are not eligible as a mutual benefit corporation.

Religious Corporations

  • A religious corporation may be formed for a religious purpose, and may not distribute assets to members or directors, but are subject to the least regulation of the three categories.


Whether you have a question about Categories of Non-Profits, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!
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About Tyler Jensen

I work with entrepreneurs who are looking to attract investment and get out of the "Garage". I am passionate about helping entrepreneurs start companies that matter. I helped launch over 100 Companies, Non-Profits and Social Enterprises. I consider myself a serial entrepreneur, startup coach & trusted advisor. * Launching New Companies (For Profit, Non-Profit and Social Enterprise) * Expert Business Plan Writer * Extensive Network of Business Relationships focused on Launch & Rapid Growth of New Companies * Startup, Growth, Marketing, Technology, Web, Business Systems * Trusted Advisor to CEO’s & Entrepreneurs * Capital Raising Strategy Development * Startup Team Development The first company I started and sold is VAVi Sport & Social Club which grew to over 25,000 members in six years, was recognized as San Diego’s 30th fastest growing private company in 2006 by the San Diego Business Journal and 32nd fastest in 2007, and sold for over 25X the capital investment.