The California Corporations Code includes provisions governing a wide variety of nonprofit organizations. However, the "Big 3" categories of nonprofit corporations are the public benefit, mutual benefit and religious corporations. While the drafters of these laws had intended that each be a self-contained law, their provisions are in many cases identical. However, one key distinction can be found in the statement of purpose required under each of these laws. Notably, only the Public Benefit Corporation Law requires that the articles abjure private gain:
"This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for (public or charitable [insert one or both]) purposes."
Cal. Corp. Code § 5130(b)(1) (a different statement is
required if the corporation is a public bank). In contrast, the
Mutual Benefit Corporation Law simply requires (other than in the
case of a credit union or public bank) the statement that
"This corporation is a nonprofit mutual benefit corporation
organized under the Nonprofit Mutual Benefit Corporation Law. The
purpose of this corporation is to engage in any lawful act or
activity, other than credit union business, for which a corporation
may be organized under such law." Cal. Corp. Code §
7130(b)(1). The Religious Corporation Law requires that the
articles state ""This corporation is a religious
corporation and is not organized for the private gain of any
person. It is organized under the Nonprofit Religious Corporation
Law (primarily or exclusively [insert one or both]) for religious
purposes." Cal. Corp. Code § 9130(b).
Note that the foregoing discussion is concerned solely with the Corporations Code and not with the requirements for tax-exempt status under the federal and state tax laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
