CFP

By Investopedia AAA

Characteristics and Income Taxation of Business Entities - Association

Association
Income generated by various religious, educational, charitable and other philanthropic associations will often be exempt from federal taxation provided they meet the rules under Section 501(c)(3). In order to qualify under the first part of the section (Section 501(a)) of the code, the association must have articles of association, signed by at least two individuals to show its creation.

These non-profit organizations must be organized and operated exclusively for exempt purposes as set forth in Section 501(c)(3), and none of its earnings can benefit a private shareholder, donor or specific individual.

If all the requirements of section 501(c)(3) are met, then the association will receive federal tax-exempt status on the income, earnings, dividends and charitable contributions received. Most of these associations are required to pay out a portion of income at least annually to beneficiaries, research, science testing, humane treatment of animals, etc.
Taxation at Entity and Owner Level

You May Also Like

Related Articles
  1. Several things factor into the salary of a financial advisor. Here's a look.
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
    Economics

    Top 5 Forex Risks Traders Should Consider

  3. ISAs are financial instruments that allow students to raise funds to pay for their degrees by selling shares in their future earnings.
    Investing Basics

    Funding Higher Education With An ISA

  4. Top Ways to protect your purchases from credit card hackers or security breaches.
    Credit & Loans

    7 Ways To Protect Against Credit Card ...

  5. The Internal Revenue Service's new 2015 contribution limits for tax-deferred savings plans are higher; here's what you and your clients should know.
    Investing Basics

    New 2015 Contribution Limits: Advisors ...

Trading Center