What is a Non-stock Corporation?

You might think that having shares of stock is a part of the

definition of a corporation, but stock ownership isn't a
requirement for setting up a corporation. Another option is the
non-stock corporation.

A non-stock corporation is a corporation (either for-profit or

non-profit) that does not issue shares of stock.

A non-profit corporation is non-stock by definition, since the

purpose of the non-profit corporation is not to pay shareholder
dividends.

Non-profit corporations often have members, but these members

are not owners and they don't share financially from their
membership.

A for-profit corporation may be non-stock for several reasons:

The corporation may be closely held (owned by only a few

individuals} who have no interest in selling shares.
The corporation may be formed for a single, short-term
purpose or a specific transaction. For example, the
corporation may be formed to build an office building or
other construction project.
The corporation may be formed solely for the purpose of
working with another company or individual for a joint
venture.

Is a Non-stock Corporation Closely Held?

A closely held corporation is, by definition, a private company,
but a private company may still have stock.

Who are the Owners of a Non-stock Corporation?

A non-stock corporation may have owners. Since there are no

shares of stock, the owners have no monetary ownership, but they
would have the right to a share of the proceeds if the corporation
were sold.

Non-profits set up as non-stock corporations typically have

members, but these individuals are not owners in the sense that
they receive a share of any money received by the non-profit.
Non-profits typically have members, and there may be a board
of directors of the membership, with paid staff and executives.

Are There Other Types of Non-stock Corporations That are Not

Non-Profits?

Other types of organizations may decide to set up a non-stock

corporation, even though they don't want to claim tax-exempt
status as a non-profit. Some other common types of non-stock
corporations are:

civic leagues
labor organizations
business leagues
recreational clubs
other organizations (such as amateur athletic organizations)
that unify a common social goal
 educational organizations,
mutual insurance companies, or
municipal corporations.

Do Members of a Non-stock Corporation Have Liability

Protection?

Because the non-stock corporation is a separate entity, board

members and general members have the same liability protection
as shareholders, executives, and directors of stock corporations.

Forming a Non-stock Corporation in a State - An Example

Virginia allows the formation of a non-stock corporation. Under

this state's law, the corporation may not distribute dividends or
income, except as "reasonable compensation" or upon the
dissolution or liquidation of the corporation.

To form this non-stock corporation, Articles of Incorporation

must be filed with the Virginia State Corporation's Commission.
The corporation may have members, and may designate classes of
membership and rights/benefits to each class of members,
including voting rights.

Under Virginia law, the non-stock corporation is run by its board

of directors, which appoints officers of the corporation.

Difference Between Stock and Non-Stock CorporationsType of

corporationStockNon-stockDefinitionHas capital stock divided into shares
 and isauthorized to distribute to the holders of suchshares dividends or
allotments of the surplusprofits on the basis of the shares held.a non-stock
corporation is one where no part of itsincome is distributable as dividends
to its members,trustees, or officersHow do you call their corporators?its
corporators are called shareholdersits corporators are called
membersHow many votes are required?In voting, at least 2/3 of the
outstandingcapital stock is requiredIn voting at least 2/3 of the members
should voteAs to corporate powers andcapacityIn case of stock
corporations, to issue or sellstocks to subscribers and to sell stocks
tosubscribers and to sell treasury stocks inaccordance with the
provisionto admit members to the corporation if it be a non-

The Differences Between Incorporation,

Corporation & Non-Profit
by Christopher Raines

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The terms corporation, incorporation and nonprofit refer to the formation and structure of legal
entities. A corporation is an entity that the law treats as a person. Incorporation refers to the actions that
form a corporation. A nonprofit is a type of corporation whose structure and purposes differ from a business
corporation. The description of the organization as a business or nonprofit can drive whether the participants
wish to become a corporation and the actions needed to bring the corporation to life.

Corporation

A corporation may own property, sue and be sued and conduct business in its own
name. Ownership interests, called shares, in a corporation can be sold, given and
inherited; the corporation survives its owners. The shareholders' liability for business
obligations is limited to their investment; they do not risk their personal assets unless a
lender or seller requires them to guarantee payment of the debts. A board of directors,
elected by shareholders, manages the corporation.

Incorporation

Incorporation is the process that creates the corporation. The organizers must file
articles of incorporation, or charter, with the state's corporations office. The
corporation's birth certificate identifies the corporations name, which must be distinct
from that of another corporation in the state and may not mislead. Other charter
provisions include the address of the corporations main office, its life span -- which
may be indefinite -- and a description of its anticipated business and activities or that
the corporation is organized for all lawful purposes. The corporation is born when the
articles are filed, unless the articles have a later effective date.

Nonprofit

Nonprofit organizations use their earnings, funds and other resources to further their
purposes and programs, rather than to distribute to owners and investors. The
participants may, but do not have to, form a corporation. Typically, a nonprofit that
depends on minimal funding and conducts limited activities does not need to
incorporate. If the nonprofit does not incorporate, it is not required to file any
organizing documents unless it seeks tax-exempt status from the Internal Revenue
Service.

Organizing a Nonprofit Corporation

The charter for a nonprofit corporation will, as with a business corporation, have a
distinct name, main office address and provide for a board of directors. Typically,
nonprofits will state that the earnings or proceeds will not be paid to directors, officers
or participants, except as payment for services they render to the nonprofit. To obtain
a tax-exemption as a 501(c)(3) charitable organization, the corporation must, in the
articles, state only a purpose defined as charitable, such as poverty relief, or that its
purposes are limited to those in 501(c)(3). A nonprofit corporation does not have
shareholders. It may have members who vote for the board of directors; if the
corporation has no members, the board is self-chosen.