ABSTRACT
This chapter discusses the major legal aspects of forming and running a nonprofit organization (NPO), and focuses on 501(c)(3) and 501(c)(4) non-profits which constitute the vast majority of the sector. It explains the major reasons behind non-profit's tax-exempt status. The chapter aims to understand the process or steps in forming an incorporated non-profit agency. The chapter explores the major legal requirements in running a public charity. It provides an overview of the basic legal requirements of a private charity. The chapter deals with a case study on the struggle of the Internal Revenue Service (IRS) in regulating and supporting the non-profit sector. Most non-profits are required to file Form 990 with the IRS. The IRS realized that the existing form had failed to reflect some of the important changes in the laws affecting NPOs, the increasing size and complexity of their operations, and to ensuring good governance in the sector.
