Nonprofits operating in New York or planning to operate in New York frequently assume that they have no choice but to incorporate in New York State. However, New York is not the only option. Delaware is becoming an increasingly popular choice for nonprofits because of the potentially friendlier legal regime.

Governing Law

New York has a separate statutory regime for nonprofit corporations through the New York Not-For-Profit Corporation Law (the N-PCL), as well as an active charity oversight function under the New York State Attorney General’s Charities Bureau (the Charities Bureau). Delaware, on the other hand, puts both for­ profit corporations and nonprofit corporations under the jurisdiction of Delaware’s General Corporation Law (DGCL) and does not have a Charities Bureau equivalent.

However, the DGCL may afford certain advantages to nonprofits, depending on certain factual circumstances of the organization and its planned activities. If an organization’s activities in New York rise to a certain threshold level,certain registration, annual disclosure and filing requirements under the NPCL are triggered, regardless of where the nonprofit is incorporated. If however, planned activity does not meet these threshold levels, mandating compliance with New York state law, the nonprofit may take advantage of the less onerous requirements of the DGCL.1 Additionally, in order to solicit charitable contributions in New York, foreign corporations must register with the Charities Bureau under Article 7-A of the Executive Law and make annual filings.


Generally, the New York nonprofit regime is stricter and more comprehensive than the DGCL. For example, the N-PCL requires strict internal governance of nonprofits, including annual conflict of interest disclosures of board directors, officers and key persons and require regulatory approvals for actions like mergers or consolidations. In addition, New York requires three initial board directors to incorporate a nonprofit and, depending on the planned activities, certain activities may require regulatory approvals from state and local city agencies with jurisdiction.[1] The N-PCL also requires additional oversight over certain events and transactions. In order for a New York not-for-profit corporation to dissolve outside of the courts, for example ,it must follow a multi-step process involving the Attorney General,New York State Department of Taxation and Finance, and the New York Department of State, as well as any other state agencies with jurisdiction over the dissolving entity. A New York not-for-profit wishing to “sell, lease, exchange or otherwise dispose of all or substantially all its assets”, must either petition a state court or the attorney general for approval under N-PCL §§ 511and 511-a. Even a change in the purpose clause in the certificate of incorporation requires approval by the Attorney General.

Delaware does not have such an active regulatory system for its nonprofits. The Delaware Attorney General does not preapprove or review corporate transactions of its nonprofits. In stark contrast to the process in New York, dissolution of a nonprofit Delaware corporation under the DGCL solely requires that the nonprofit be current on its annual tax reports before the nonprofit can take the few relatively simple corporate actions required to dissolve upon a majority vote of its directors per DGCL §§242{b){3). Registration with the Delaware Attorney General is not required and nonprofits wishing to make corporate changes such as amendments to its certificate of incorporation, mergers and dissolutions do not need state government approval.

NPCL vs other New York Laws

New York also provides other routes for not-for-profit incorporations:

  1. Education corporations- Formation of a corporation under the Education Law is generally disfavored except for institutions which will be granting degrees on post high school level (not for-profit corporations and religious corporations can operate elementary and high schools, administer Regents examinations, and grant Regents diplomas).
  2. Religious corporations -There are special provisions applicable to entities formed under the Religious Corporations Law; certain provisions of the Not-For-Profit Corporation Law are also applicable to them. Unlike not-for-profit corporations which only require Attorney General or court approval for disposition of “all or substantially” all of their assets, religious corporations require Attorney General or court approval for any sale, mortgage or lease (as Lessor) of real property for in excess of five years. The approval process is subject to delays and may include restrictions on the use of proceeds.

Other Considerations

Delaware also has a simpler and speedier process of incorporation. Only one board member is required for governance of the nonprofit and no regulatory agency consents are required. However, although the Delaware process is much simpler and quicker, a Delaware nonprofit is required to engage and maintain a “Registered Agent” whose purpose is to receive all legal documents on behalf of the nonprofit in Delaware. A Registered Agent adds costs each year. There is no such requirement in New York. Other regulatory simplicities of the Delaware system for nonprofits include automatic exemptions from various state and local taxes for nonprofits that are exempt from federal income tax under Section 501{c)(3) of the Internal Revenue Code.

In New York, Section 501{c){3) nonprofit organizations must separately apply for state and local tax exemptions property taxes and sales taxes. Additionally, all New York nonprofits are required to submit annual filings with the New York Attorney General on the state-specific CHAR 500 form, whereas Delaware nonprofits conducting activities in Delaware simply file a copy of the federal Form 990 with the Delaware attorney general. Certain AG filers will need an “audit committee” and a full audit in New York. It is clear that the New York regime for not-for-profit corporations is more burdensome than Delaware’s from a regulatory perspective. However, compliance with New York State’s regulatory requirements may be unavoidable if any significant activity or funding is planned to occur in New York City or elsewhere in the state. A nonprofit incorporated in Delaware that solicits funds or is “conducting activity” in New York will fall under the New York regime, creating duplicative reporting requirements. Nonprofits incorporating in Delaware will be subject to less regulatory oversight and greater ease of corporate changes, such as dissolution, but should also consider the ongoing annual expense of maintaining a Registered Agent if incorporated in Delaware.

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[1] It is important to note that organizations incorporating in Delaware but operating in New York will need to obtain a certificate of authority in order to conduct programs or provide services in New York



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