To understand or answer these questions, you need legal knowledge about the types of nonprofit organizations. However, it is not easy to understand because the laws governing the form of non-profit organizations are diverse and complex. Please read it carefully for just 10 minutes! You can understand the legal concept of the form of an organization neatly. |
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A. Corporation vs. Unincorporated Association
A corporation, or juristic person, is defined as a body of ① specific people’s association or ② specific property having a personality as a subject of rights and duties equal to a natural person by the provisions of the Acts. That is, we may call a non-human body or organization a ‘juristic person’ after giving it legal personality. We can establish a corporation(juristic person) by enacting the Articles of incorporation of it and making registration of it at the seat of the principal office by the provisions of the Acts, unless otherwise specifically provided. (Articles 31, 33, and 34, The CIVIL ACT)
An association that is not a juristic person is called an ‘unincorporated association.’ An unincorporated association does not need to be under the provisions of the Acts, to enact the Articles of incorporation of it and making registration of it; instead, it cannot have legal personality. But it is given limited legal personality as a subject of rights and duties by some laws.
B. Incorporated Association vs. Incorporated Foundation
Of the corporation explained above, a body of ① specific people’s association is called ‘incorporated association,’ and that of ② specific property is called ‘incorporated foundation.’
C. Nonprofit Corporation
A corporation that aims for non-profit business is called a non-profit corporation. Establishing a non-profit corporation requires, in addition to the requirements described above, ‘permission of the competent authorities.’ (Article 32, The CIVIL ACT) To sum up, establishing an association or foundation as a corporation requires :
- To establishment in accordant with the provisions of the Acts
- To enact the articles of incorporation of it
- To obtain permission for the establishment from the competent authorities and
- To complete the registration of establishment
However, in the case of establishing a nonprofit organization as unincorporated, the requirements above are not applied.
D. Nonprofit Corporation under ‘Article 32 of the CIVIL ACT’ vs. Nonprofit Corporation under the ‘special laws’
It is called a general law when it has a wider range of effects on a certain matter than another one. The latter is called a special law.
It is the CIVIL ACT(Article 32) that has the widest effect on the establishment of non-profit corporations. Because the PRIVATE SCHOOL ACT, the MEDICAL SERVICE ACT, and the ACT ON THE ESTABLISHMENT AND OPERATION OF PUBLIC INTEREST CORPORATIONS (hereinafter the PUBLIC INTEREST CORPORATIONS ACT) respectively regulate more definite forms of non-profit corporations than the CIVIL ACT, they are all special laws on the CIVIL ACT on the matter of establishing non-profit corporations.
Therefore, the school juristic persons under the PRIVATE SCHOOL ACT(subparagraph 2 of Article 2), the social welfare foundations under the SOCIAL WELFARE SERVICES ACT(subparagraph 3 of Article 2), the medical corporations under the MEDICAL SERVICE ACT, and the public interest corporations under the PUBLIC INTEREST CORPORATIONS ACT(Article 2) are called the ‘nonprofit corporations under the special laws’, and the others ‘nonprofit corporations under Article 32 of the CIVIL ACT.’
E. Nonprofit, Non-governmental Organization (hereinafter NPNGO)
Non-profit organizations eligible for support under the provision of the ASSISTANCE FOR NON-PROFIT, NON-GOVERNMENTAL ORGANIZATIONS ACT(hereinafter NON-PROFIT ORGANIZATIONS ACT) are called NPNGOs. One might be easier to establish NPNGOs than Nonprofit corporations, because NPNGOs are just to be registered(Article 4(1)), not to be permitted by the competent authorities.
An incorporated or unincorporated organization will do for the NPNGO.
F. Legal Status of Nonprofit Organization under Various Tax Laws
Until now, we have looked at the laws and regulations that underlie the establishment of non-profit organizations, but there are legal concepts to be aware of regarding tax applicable to donations received by organizations.
Designation Organization Receiving Donations (under the CORPORATE TAX ACT)
For non-profit corporations to have their individual or corporate donors receive tax benefits such as the inclusion of donations in deductible expenses or tax credit for donations, they must be designated as the “designation organizations receiving donations(hereinafter DORD).” The scope and requirements of the DORD can be found in the Enforcement Decree of the Corporation Tax Act (Article 36(1)).
Private Organizations Eligible for Donations (under the INCOME TAX ACT)
For unincorporated NPNGOs to have their donors receive tax benefits such as the inclusion of donations in necessary expenses or tax credit for donations, they must be designated as the “private organizations eligible for donations(hereinafter POED).” The scope and requirements of the POED can be found in the Enforcement Decree of the INCOME TAX ACT(subparagraph 5 of Article 80(1)).
Public Interest Corporation(s), Etc. (under the INHERITANCE TAX AND GIFT TAX ACT)
The Inheritance Tax and Gift Tax Act stipulates that no inheritance tax or gift tax shall be imposed on property inherited or donated to the ‘public interest corporation(s), etc.’ (Article 16, Article 48). DORDs and POEDs are included in the ‘public interest corporations, etc.’(subparagraph 9 of Article 12, Enforcement Decree of the INHERITANCE TAX AND GIFT TAX ACT).
G. Conclusions
Combining the concepts described above into a diagram, it is shown below. Although most NPNGOs under the NON-PROFIT ORGANIZATIONS ACT are unincorporated, there are some corporations in NPNGOs, so you can see that they are drawn overlappingly.
Figure. Legal Types and Discipline Act for Non-profit Organizations
Source : Jahang, Lee and Jun(2018). 「A Comprehensive Analysis of Nonprofit Organizations in Korea(한국 비영리조직의 개괄적 현황 분석)」. The Beautiful Foundation. pp 10.
The number of non-profit organizations of each type identified in 2018 (excluding school juristic persons, social welfare foundations, and medical corporations) is as shown in the table below.
Table. Number of non-profit organizations by legal type
| Legal type | Nonprofit Corporations | Public Interest Corporations | NPNGOs | DORDs, etc. |
|---|---|---|---|---|
| Basis Act for Establishment | CIVIL ACT | PUBLIC INTEREST CORPORATIONS ACT | NON-PROFIT ORGANIZATIONS ACT | CORPORATION TAX ACT and INCOME TAX ACT |
| Type of Certification | Permission (of ministry in charge) |
Permission (of ministry in charge) |
Registration (with MOIS1) or local governments) |
Designation (by MOEF2)) |
| Number of Organizations | 20,414 | 3,407 | 13,427 | 3,480 + α |
Source : Jahang, Lee and Jun(2018). 「A Comprehensive Analysis of Nonprofit Organizations in Korea(한국 비영리조직의 개괄적 현황 분석)」. The Beautiful Foundation. pp 10.
Note :
1. MOIS = Ministry of Interior and Safety(행정안전부)
2. MOEF = Ministry of Economy and Finance(기획재정부)
In the data above, the total number of nonprofit corporations and public corporations equals 23,821. This is more than 21,652 identified by the Beautiful Foundation (hereinafter BF) in 2018. In the case of NPNGOs, it is more than 12,887 by the BF. The reasons for the gaps might be due to the overlapped calculations by region or ministry.
Appendix. Key Korean Legal Terms on Nonprofit Organizations in Korean
Source: Korean Law Information Center(law.go.kr), Ministry of Government Legislation
| in English | in Korean | ||
|---|---|---|---|
| Legal Term | Its Abbreviations | Legal Term | Its Abbreviations |
| ACT ON THE ESTABLISHMENT AND OPERATION OF PUBLIC INTEREST CORPORATIONS | PUBLIC INTEREST CORPORATIONS ACT | 공익법인의 설립ㆍ운영에 관한 법률 | 공익법인법 |
| Articles of incorporation | 정관 | ||
| ASSISTANCE FOR NON-PROFIT, NON-GOVERNMENTAL ORGANIZATIONS ACT | NON-PROFIT ORGANIZATIONS ACT | 비영리민간단체지원법 | 비영리단체법 |
| CIVIL ACT | 민법 | ||
| CORPORATE TAX ACT | 법인세법 | ||
| corporation | 법인 | ||
| designation organization(s) receiving donations | DORD | 지정기부금단체 | |
| designation organization(s), etc. receiving donations | DORDs, etc. | 지정기부금단체등 | |
| Enforcement Decree (of ~) | 시행령 | ||
| inclusion (of donations) in deductible expenses | (기부금의) 손금 산입 | ||
| inclusion (of donations) in necessary expenses | (기부금의) 필요경비 산입 | ||
| incorporated association(s) | 사단법인 | ||
| INHERITANCE TAX AND GIFT TAX ACT | 상속세 및 증여세법 | 상증세법 | |
| incorporated foundation(s) | 재단법인 | ||
| juristic person | 법인 | ||
| medical corporation | 의료법인 | ||
| MEDICAL SERVICE ACT | 의료법 | ||
| Ministry of Economy and Finance | MOEF | 기획재정부 | 기재부 |
| Ministry of Interior and Safety | MOIS | 행정안전부 | 행안부 |
| nonprofit corporation(s) | 비영리법인 | ||
| nonprofit, non-governmental organization | NPNGO | 비영리민간단체 | |
| private organization(s) eligible for donations | POED | 기부금 대상 민간단체 | |
| PRIVATE SCHOOL ACT | 사립학교법 | 사학법 | |
| public interest corporation(s) | 공익법인 | ||
| public interest corporation(s), etc. | 공익법인등 | ||
| school juristic person | 학교법인 | ||
| social welfare foundation | 사회복지법인 | ||
| SOCIAL WELFARE SERVICES ACT | 사회복지사업법 | ||
| tax credit | 세액공제 | ||