The various types of nonprofits are created to advance civic, charitable, and social causes. By and large, nonprofits also provide benefits to the general public.
In this article, we will consider the different classes of nonprofits recognized in the country, Bahamas, and their functions.
- The various types of nonprofits are known to complement some of the efforts of government in a country.
- Hence, governments are required to create the conditions necessary for nonprofits to thrive and undertake their responsibilities.
What are the types of nonprofits in the Bahamas
The Bahamas recognizes four types of nonprofits. Likewise, each of these entities is governed by a legislative act. We will outline each of them in detail.
1. Trusts
The Trustee Act regulates these types of nonprofits. For the most part, any asset can be a trust asset. This includes stock and bond certificates, real estate, bank accounts, cryptocurrency, mutual funds, and investment portfolios.
The Purpose Trust Act of 2004 was created in the Bahamas to regulate all non-charitable trusts in the area. For charity reasons, assets and securities are held in a charitable trust.
In general, Discretionary trusts and Fixed trusts are the two most popular kinds of purpose trusts. Discretionary trusts provide trustees with a great deal more freedom when making distributions from the trust. Also, the trustee has complete discretion over how to distribute income and capital assets, protecting both against potential beneficiary abuse.
On the other hand, Fixed trusts include a trust document in which the settlor specifies how the assets and property of the trust will be distributed. In fixed trusts, trustees can manage assets to the trust’s advantage, but they have no control over how or when beneficiaries receive their distributions.
2. Foundations
The Bahamas was one of the first common law nations to make a private foundation available with the passage of the Foundations Act in 2004. These types of nonprofits are considered legal entities with residence and domicile in The Bahamas. In addition, foundations can file a lawsuit and be sued in their own name.
Forthwith, any assets that are legally and beneficially given to a Bahamian foundation pass from the founder’s ownership to the foundation. Until they are distributed, the assets do not belong to any beneficiary.
Likewise, the Act contains provisions just like the law governing trusts. This is to help guide organizations in the creation of a foundation. The Act also guards against coerced heirship rights and provides for the termination of a beneficiary’s interest upon challenge.
3. Company Limited by Guarantee
A Company Limited by Guarantee is governed by the Bahamas Companies Act. These types of nonprofits only have their members’ liability restricted to the amount they have pledged. This is to help contribute to the firm’s assets in the case of its dissolution.
According to the Act, such a company’s Memorandum of Association must state that each member undertakes to contribute to the assets of the company, in the event of a winding up during the time that he is a member. As a result, such a sum must absolutely be mentioned in the memorandum of association.
Additionally, the guarantee only applies in the event of a company winding up and is relevant for debts and liabilities incurred by the company.
A company limited by guarantee must have the word “limited” in its name. Also, just like a company limited by shares, a company limited by guarantee has a distinct legal personality.
4. Cooperative Societies
In the Bahamas, all cooperative societies must be registered with the Director of Societies. This is in line with the Cooperative Societies Act 2005 and Cooperative Societies Regulations 2012.
In general, a good legal foundation for operation is provided by the cooperative’s by-laws. This depicts an agreement between the cooperative’s members regarding its goals, objectives, and operating procedures.
Cooperative Societies constitute a group of people who share the same need, goals, and ambitions. This could be in the area of economic, social, and/or cultural specializations. Hence, all activities and resources are democratically governed and jointly owned. Also, users of the cooperative’s goods, resources, and/or services are considered to be its members.
Basically, the registration of a cooperative society in the Bahamas takes one month.
What are the tax-exempt regulations for nonprofits?
The Value Added Tax Act and the Value Added Tax Regulations generally provide tax-exempt status to the various types of nonprofits. However, there are some circumstances in which this exemption may not be applicable.
Firstly, it should be noted that for an organization to qualify as an NPO, it must first receive approval. If an organization receives approval, a license or certificate of registration will be issued to the organization designating it as an approved NPO.
Likewise, a nonprofit will not be regarded as a charity organization for the VAT Act and Regulations if it does not receive permission. The conditions for an NPO or “charitable” organization to be free from VAT are outlined in the VAT Act and Regulations.
Conclusion
The various types of nonprofits are known to complement some of the efforts of government in a country. Likewise, the many services offered by nonprofits largely impact people as well as communities.
By and large, specific NGOs have the significant global influence and lobbying skills needed to spur social change within the nation. Hence, governments are required to create the conditions necessary for nonprofits to thrive and honor their commitments.
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