In North Carolina, a nonprofit corporation can be formed for any lawful purpose (N.C. Gen. Stat. § 55A-3-01(a)(2018)). A nonprofit corporation cannot be created for a purpose that violates criminal law or tends to induce the commission of a crime. A nonprofit corporation’s purpose also is unlawful if the accomplishment of the purpose violates public policy.

In general, nonprofit corporations are permitted to engage in activities that generate profits so long as the profits are used to accomplish the corporation’s purpose. Unlike for-profit corporations, nonprofit corporations are subject to the “nondistribution constraint.”

How do you choose a purpose?

Nonprofit corporations should choose a broad corporate purpose that permits the organization to change directions without requiring an amendment to the articles of incorporation. However, the purpose must be specific enough to allow the corporation to be eligible for 501(c)(3) tax-exempt status.

Nonprofit corporations that intend to apply for 501(c)(3) tax-exempt status must include certain language in their articles of incorporation. The articles of incorporation must limit the corporation’s purpose to certain exempt purposes set forth in Section 501(c)(3) and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further those purposes.

The IRS provides the following example of a broad corporate purpose:

Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

Nonprofit corporations should use the language from the IRS in their articles of incorporation.

Additionally, the organization’s purpose must benefit an indefinite class of individuals rather than specific persons. For example, the organization’s purpose could be “to grant medical bill assistance to children with diabetes” but not “to grant medical bill assistance to Jane Doe.”

Nonprofit corporations should research purpose statements used by similar organizations to use as examples when drafting their own.