What is a Nonprofit

by Staffer Team

A nonprofit organization or foundation (NPO), is dedicated to furthering a particular social cause or advocating for a shared point of view. In summation, it is a business/corporation that has been given tax-exempt status by the Internal Revenue Service (IRS) because the further a religious, scientific, charitable, educational, literary, public safety or cruelty-prevention mission or area of work. an organization needs to request 501(c) prior to operating with a tax exemption.

Types of Nonprofits

There are two main types of nonprofits: nonprofit organization (NPO) and not-for-profit organization (NFPO).

  1. NPO’s serve the public via goods and services
  2. NFPO's may serve just a group of members

Others include:

  • 501(c)(3), are organizations that are “corporations, funds or foundations that operate for religious, charitable, scientific, literary or educational purposes.”
  • Section 501(c)(4): civic leagues and social welfare organizations, homeowners associations, and volunteer fire companies.
  • Section 501(c)(5): such as labor unions
  • Section 501(c)(6): such as chambers of commerce.
  • Section 501(c)(7): such as Social and Recreational Clubs
  • Section 501(k): childcare-related organizations.

What is the difference between public charities and foundations?

501(c)(3) organizations are divided into public charities and private foundations

  • Public charities get their support from the general public and government; donations are usually tax exempt
  • Private foundations distribute money via grants to fulfill a public purpose; donations are usually tax exempt; they are not allowed to engage in direct lobbying efforts
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