Georgia Nonprofit Corporations

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The Georgia Nonprofit Corporation Code, O.C.G.A. § 14-3-101, et sec. (the “GNCC”) governs the formation, operation and dissolution of nonprofit corporations in Georgia.  A nonprofit corporation in Georgia is managed by its board of directors and operated by its officers and employees.  Instead of shareholders, a nonprofit corporation may, but is not required to, have members. Nonprofit corporations, of course, are specifically organized to not earn profits. No part of the income or surplus of a Georgia nonprofit corporation may be distributed to its members, directors or officers; however, reasonable compensation may be paid for services rendered.  A Georgia nonprofit corporation may also make a distribution to (i) an organization organized and operated for the same or similar purposes as the distributing corporation, (ii) other specified nonprofit corporations, and (iii) governmental entities.  Additionally, a Georgia nonprofit may make a distribution to repurchase membership interests, subject to several limitations. 

A nonprofit corporation has an existence of its own, independent of then terms of office or employment of members, directors or officers. It can sue or be sued in its own name and can own real estate in its own name.

Advantages of Incorporation: pros and cons of nonprofit vs for-profit
The principal advantage of incorporation is that it protects the shareholders or members from personal liability for the obligations and liabilities of the corporation, including unlawful actions of officers, directors and staff acting on its behalf.  In addition, incorporation establishes continuity; corporations (both nonprofit and for-profit) are subject to a body of statutes that provide very specific guidance as to their formation and operation; and incorporation brings stature to the organization and implies stability.

Where profit is not a goal and the enterprise can be funded without the need for access to capital markets, the nonprofit corporation is the preferred vehicle for pursuing social objectives. Although nonprofit corporations are not prohibited from engaging in commercial activities, the directors of a nonprofit are duty-bound to devote primary attention to the promotion of the social mission of the corporation rather than the production of net income.

On the other hand, if access to capital markets is needed, a for-profit corporation (or limited liability company, discussed here) is likely to be the preferred option because nonprofit corporations cannot issue capital stock.  The directors of a for-profit corporation, however, owe strict  duties to the shareholders to maximize profits and value.  Therefore, unless the directors and managers can tie the social mission of their for-profit corporation directly to its business purpose, they can be sued for breach of their duties to shareholders and for misuse of corporate assets if they focus too much on the social mission and forego profits.  This problem can be avoided if all shareholders agree to pursue a social mission or devote a percentage of revenues to charitable causes but such agreements may be temporary because a change in control—or a drop in earnings—can lead to amendment or abrogation of shareholder agreements.

A nonprofit corporation attains its separate legal status through the filing and approval by the Secretary of State of Georgia, Corporations Division, of its articles of incorporation. This document is in essence a contract between the state and the nonprofit corporation in which the State of Georgia grants individual legal status to the corporation in exchange for the corporation’s commitment to follow its rules.

One or more persons may act as the incorporator(s) of the nonprofit corporation by executing and delivering the articles of incorporation to the Georgia Secretary of State for filing.  The corporate existence of the nonprofit corporation begins when the articles of incorporation are filed. The basic filing fee is $100. 

The GNCC requires that the articles of incorporation for a nonprofit corporation include the name of the entity, the name and address of the entity’s registered agent in Georgia, the name and address of each incorporator, whether or not the entity will have members, the address of the principal office of the entity, if different from the registered office, and a statement that the entity is organized pursuant to the Georgia Nonprofit Corporation Code. Additionally, the articles of incorporation may, but are not required to, set forth the purpose or purposes for which the entity is organized, the names and addresses of the directors, and provisions not inconsistent with law regarding the management of the entity, the certain limitations on liability of directors, and distribution of assets on dissolution.

The name of the entity must contain the word “corporation,” “incorporated,” “company,” or “limited,” or the abbreviation “Corp.,” “Inc.,” “Co.,” or “Ltd.,” or words or abbreviations of like import in a language other than English.  The name must also be distinguishable from other entity names on record with the Georgia Secretary of State. 

If the nonprofit corporation intends to obtain exemption from federal and state income taxation, the articles of incorporation must conform with applicable statutes and regulations (discussed below). 

A generic form of articles of incorporation for a nonprofit corporation may be found on the Georgia Secretary of State’s website at

See also “Georgia Corporate Forms” for generic forms of articles of incorporation for a nonprofit corporation, specifically Form 2.025 (nonprofit corporation with members) and Form 2.026 (nonprofit corporation without members).  See Fischer, David Jon, et. al., Georgia Corporate Forms, Volume 1 (2005 ed.).

Management and Control
Once the nonprofit corporation has been established, the initial board of directors, if named in the articles of incorporation, should hold an organizational meeting, either in person or by consent, to ratify the acts in connection with the initial formation of the corporation and adopt bylaws.  The bylaws may also be adopted by the incorporator(s).  If the initial directors are not named in the articles of incorporation, the incorporator or incorporators should hold an organizational meeting, in person or by consent, to elect directors. The bylaws set forth the rules and procedures governing the decision-making process of the board of directors and the general operation and management of the corporation consistent with the applicable statutes of Georgia and the articles of incorporation.

Typically, the bylaws of a nonprofit corporation contain provisions governing member, director and officer qualifications, powers, and duties; voting; filling of vacancies; meetings; property holding and transfer; indemnification of directors and officers; committees; bank accounts; fiscal year audits and financial reports; conflicts of interest; and amendment and dissolution procedures.

A generic form of bylaws may be found in “Georgia Corporate Forms” as Form 2.066 (nonprofit corporation with members) and Form 2.067 (nonprofit corporation without members).  See Fischer, David Jon, et. al., Georgia Corporate Forms, Volume 1 (2005 ed.).

Liability of Members, Directors and Officers
A member of a Georgia nonprofit corporation is not, as such, personally liable for the acts, debts, liabilities or obligations of the corporation. A member may become liable to the corporation for agreed upon dues, assessments or fees.    Directors of Georgia nonprofit corporations are required to discharge their duties in a manner which the director believes in good faith to be in the best interests of the corporation and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.  A director is entitled to rely on information from officers, employees and other persons if the director believes such persons to be reliable and competent in the matters presented.  A director who complies with the applicable standard of conduct will not be liable to the corporation, any member, or any other persons for actions taken or not taken as a director.  Officers of Georgia nonprofit corporations are held to a similar standard of conduct as described above and are not liable to the corporation, any member, or other persons for actions taken as an officer in compliance with the GNCC. 

The GNCC permits a nonprofit corporation to limit the liability of a director to the corporation or its members for monetary damages for actions taken or for failure to take any action as a director, except liability for an appropriation of a business opportunity of the corporation, for intentional misconduct or knowing violation of the law, for actions resulting from a conflict of interest, and for transactions from which the director received an improper personal benefit. 

A Georgia nonprofit corporation may indemnify a director from liability if the director conducted himself or herself in good faith and he or she reasonably believed, in the case of conduct in the director’s official capacity, that such conduct was in the best interests of the corporation, and in all other cases, that such conduct was at least not opposed to the best interests of the corporation.  In the case of a criminal proceeding, the director must have believed that he or she had no reasonable cause to believe his or her conduct was unlawful.  A Georgia nonprofit corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation (i.e., derivative actions), except for reasonable expenses if the director is able to meet the applicable standard of conduct.  Likewise, a Georgia nonprofit corporation may not indemnify a director in connection with any other proceeding if it is determined that the director received a personal benefit was improperly received by the director. If a director is successful in the defense of a proceeding against the director in his or her capacity as a director of the corporation, the corporation is required to indemnify the director for reasonable expenses incurred.

Mergers, Acquisitions and Dissolution
The GNCC provides that one or more nonprofit corporations may merge into a domestic or foreign corporation (for profit or nonprofit) or other entity, subject to certain restrictions designed to prevent the diversion of assets of a charitable corporation to non-charitable purposes.  A corporation that is operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, to foster national or international sports competition, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder, member or individual is restricted from taking certain actions, including dissolution and certain types of mergers, without judicial approval. A corporation meeting the above description, which is the same as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986 (a “Charitable Corporation”), must either obtain judicial approval prior to a merger or otherwise follow the procedures set forth in Section 14-3-1102(a)(2), unless the surviving corporation resulting from the merger is also a Charitable Corporation.  Section 14-3-1102(a)(2) requires the Charitable Corporation to transfer certain of its assets prior to the effective time of the merger and obtain consent of a majority of its board members who will not be affiliated with the surviving corporation.  Additionally, a corporation desiring to follow the procedures of Section 14-3-1102(a)(2) must notify the Georgia Attorney General and deliver a copy of the proposed plan of merger at least 30 days prior to the proposed merger.

Subject to the restrictions set forth above, a merger of one or more Georgia nonprofit corporations into another entity is accomplished pursuant to a plan of merger followed by filing of articles of merger and notice of publication. A plan of merger must include the name of each corporation or other entity planning to merge and the name of the surviving corporation or other entity, the terms and conditions of the planned merger, and the manner and basis, if any, of converting the membership interests of each nonprofit corporation, and the shares, units or other securities of the surviving corporation or any other corporation or entity into cash or other property.
If the nonprofit corporation has members, the plan of merger must be approved by the board and submitted for approval by the members.  Unless the corporation’s articles, bylaws, or its board or members require a higher percentage of voting approval, the plan of merger must be approved by two-thirds of the members’ votes cast or a majority of voting power, whichever is less. Additionally, the plan of merger must be approved by other persons whose approval is required by the articles of incorporation for an amendment to the articles or bylaws.  If the nonprofit corporation does not have members, the plan of merger must be approved by a majority vote of the directors, unless the corporation’s articles, bylaws or its board provide for a higher percentage of voting approval.  Nonprofit corporations without members are required to give notice to the directors of the meeting at which approval of the merger is to be obtained.   

After the requisite approval of the plan of merger has been obtained, the surviving entity should deliver to the Georgia Secretary of State the articles of merger, which sets forth the plan of merger, certain statements regarding the requisite approval obtained by the corporation and a statement that a request for publication of a notice of merger will be made as required by the GNCC.  The surviving entity should have the notice of merger published as set forth in the GNCC no later than the next business day after filing the articles of merger.  The merger takes effect when the articles of merger are filed, unless a delayed merger is specified in the articles of merger.  Upon the effectiveness of the merger, every other corporation or entity to the merger merges into the surviving entity and the separate existence of the other entities ceases.  
A Georgia nonprofit corporation may be dissolved upon adoption of a plan of dissolution by the corporation and making the requisite filings with the Georgia Secretary of State and publications prescribed by the GNCC.  A plan of dissolution shall provide for the distribution of assets in the order provided for in the GNCC. 

Additionally, a Charitable Corporation is required to notify the Georgia Attorney General 30 days in advance of the dissolution and is restricted from transferring any assets until 30 days after such notice, and must provide to the Attorney General a list of those to whom the assets of the corporation were transferred.  If the corporation has members entitled to vote on dissolution, they are given notice and an opportunity to vote on dissolution.  If the corporation has no members entitled to vote, the dissolution may be effected by a vote of the majority of the directors, upon specific notice to the directors. 

Once a corporation obtains the requisite authorization to dissolve, the corporation must deliver notice of intent to dissolve to the Georgia Secretary of State, indicating the name of the corporation, the date dissolution was authorized, and a statement that the dissolution was duly approved by the members, if required. Additionally, the corporation must deliver to the Georgia Secretary of State a certificate verifying the request for publication of the notice of intent to dissolve and follow the procedure for publishing such notice similar to that provided for for-profit corporations.  Once all known obligations of the corporation have been discharged, the corporation may dissolve by delivering the articles of dissolution to the Georgia Secretary of State for filing, which sets forth the name of the corporation, the date when the notice of intent to dissolve was filed and that it has not been revoked, a statement regarding the satisfaction of all debts and obligations, a statement regarding the distribution of any remaining assets and a statement regarding any pending actions against the corporation.  

Recordkeeping, State Reports and State Taxes
All corporations incorporated in the State of Georgia, including nonprofit corporations, are required to file an annual registration. The basic filing fee is $30.  All corporations should keep minutes of all meetings of members and the board of directors, executed consents, and all committee actions, as part of the corporation’s permanent records.  All corporations should also maintain appropriate accounting records, a record of the name and address of all members and any voting rights for each member.   

In general, a corporation which is incorporated under Georgia law but otherwise has no contact with Georgia will generally not be subject to Georgia taxes.  However, even to the extent that a nonprofit corporation has assets or activities in Georgia, such nonprofit corporation may be exempt from corporate income taxes, property taxes, and Georgia corporate net worth taxes.  For all tax years beginning after January 1, 2008, corporations which are exempt from federal income taxation pursuant to Section 501(c), 501(d), 501(e), 664, or 401 of the Internal Revenue Code are automatically exempt from Georgia corporate income taxes.  Also, any “organization not organized for pecuniary gain or profit” is exempted from Georgia’s corporate net worth tax. Institutions of “purely public charity” are also exempt from property taxes imposed by counties.  In addition to that general exemption, those charitable institutions may use a building and up to 15 acres of land “for the purpose of securing income” so long as the income is used exclusively for the operation of that charitable institution. 

However, there is no general exemption for nonprofit entities from the payment of sales or use taxes on Georgia purchases.  Such entities must pay tax on their taxable purchases (or taxable uses) in Georgia, and they must also collect and remit sales/use taxes on their taxable sales in Georgia.  Numerous nonprofit taxpayers, though, are specifically exempted by Georgia statutory provisions.  

Nearly every type of activity by a nonprofit corporation can become the target of some kind of a claim by a firm or an individual that alleges damage or injury by the corporation or individuals responsible for it (i.e., directors, officers or employees). Even if the claim is without merit, the costs of defending against the claim can be very substantial.

To encourage qualified individuals to accept positions as directors and officers, many nonprofit corporations purchase insurance to cover director and officer (D&O) liability.  In addition, most responsible nonprofit corporations purchase a basic comprehensive general liability policy that covers liability for accidents in the corporation’s offices, at sponsored meetings and the like.  A Georgia nonprofit corporation is specifically permitted to purchase liability insurance on behalf of its directors, officers, employees, or agents of the corporation or who, while a director, officer, employee, or agent of the corporation, serves at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign business or nonprofit corporation or other entity, to insure against potential liability of such persons in their capacity or arising from such person’s status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify or advance expenses to the individual against the same liability.  Thus, the GNCC theoretically permits the corporation to insure its directors against judgments or amounts paid in settlement of derivative suits and against expenses incurred by a director even in circumstances in which a director has been found to have acted unlawfully or in bad faith.
Liability insurance for nonprofit corporations is often a very complicated matter.  Consultation with an experienced and knowledgeable agent or consultant is essential in order to obtain the right coverage at the lowest premium.

  • Georgia Secretary of State, Corporations Division,
  • Fischer, David Jon, et. al., Georgia Corporate Forms, Volume 1 (2005 ed.).  
  • Oleck and Stewart, Nonprofit Corporations, Organizations &  Associations (Prentice-Hall, 1994, Cum. Supp. 2002)
  • Jacobs, Jerald A., Association Law Handbook (ASAE & The Center for Association Leadership 4th ed., 2007)
  • Nonprofit Governance and Management (American Bar Association and American Society of Corporate Secretaries, 2002)
  • Guide to Nonprofit Corporate Governance in the Wake of Sarbanes-Oxley (American Bar Association Section of Business Law, 2005)
  • Guidebook for Directors of Nonprofit Corporations (American Bar Association Section of Business Law 2d ed., 2002)

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