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There are any number of debt settlement companies who purport to be non-profit or not-for profit corporations, but are they really?

A non-profit organization (NPO) is a legal entity organized and incorporated under the corporate statutes in the state wherein the corporation is doing business. This legal entity is the vehicle under which business is conducted. Although though not required, some apply for and receive a federal tax exemption called an Internal Revenue Service 501-C-(3) tax exemption. Usually NPOs are set up and are used for charitable purposes. Examples would be organizations such as The United Way, The Red Cross, and The Salvation Army.

NCOs can make a profit, more accurately called a surplus. These earnings must be retained by the NCO for its self preservation, expansion, future plans. Earnings cannot be distributed as dividends or profit sharing or in any other like means to anyone. Most earning go to perform the “charitable” purposes for which the NPO was established.

A debt settlement company NPO is a “perversion” of legitimate NPOs. They do not apply for and get an Internal Revenue Service 501-C-(3) tax exemption because to do so would call their activities into question. They do not want the Internal Revenue Service looking into how they operate. They could be subjected to investigation and sanctions including civil and criminal penalties. Most devastating for them is the fact that their operations may be closed down by the Internal Revenue Service.

If they are truly “legitimate NPOs” why do they operate if they can’t distribute earned profit to equity holders, owners and others? The truth of the matter is; they do. Distributions are made to the owners, equity holders, and others by paying substantial salaries and bonuses. Since they don’t have a 501-C-(3) tax exemption the Internal Revenue Service will not call them to task. Debt settlement companies doing business under the auspices of being an NPO do make a profit and that profit goes to its owners and equity holders and others.

Why would debt settlement companies advertise themselves to be NPOs? The answer is simple. They want to lead the debt settlement consumer to think that the debt settlement company’s operation is purely altruistic. That they are in business only as a service to help the consumer and not to make a profit. In a subtle way, the purported non-profit debt settlement company is trying to lead the consumer to believe that the consumer can get debt settlement services leading to credit card debt elimination at little or no costs.

Consumers should not be fooled by this advertising ploy. The truth of the matter is that there is no “free” help for a consumer in any credit card debt relief programs.

Credit card debt help can be obtained through the attorneys provided by Associated Attorneys, LLC. For information call (866) 411-4693 or contact

About the Author: Melvin R. Singleterry is a licensed practicing attorney, former Judge, and former elected District Attorney, specializing in credit card debt negotiation and debt settlement, owner and manager of Associated Attorneys, LLC.

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