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May nonprofit issue stock?

Your Legal Questions Answered

May nonprofit issue stock?

We're extremely sure that we know the answer to this one, but really would like your advice. Can a 501(c)(3) nonprofit corporation issue stock?

I assume that you are extremely sure that nonprofits can’t issue stock. But this is one of those questions of state law on which you cannot make a blanket statement covering all states. Although most states prohibit nonprofit corporations (whether or not charitable corporations) from issuing stock, there are at least a handful of states, including Pennsylvania and Michigan, where the law permits it.  The nonprofits can’t pay dividends to the stockholders and the certificates are more like membership certificates in other nonprofits than stock certificates in a for-profit corporation.  But stock-issuing nonprofits, while rare, do exist.

Tuesday, October 23, 2012

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