Have you ever donated to a charity? What about a hospital or school? If so, you may have given to a nonprofit. But, what is a nonprofit? And, how do they work? Get the answers to all of your burning questions below.

What is a nonprofit organization?

让我们从最基本的开始:非营利是什么意思?非营利组织，简称NPO，是一个以促进社会事业和提供公共利益为目的的组织。非营利组织利用利润来支持组织的事业或目标，但资金也可以用来支付其他东西，比如行政成本。

Because of its mission, an NPO qualifies for tax-exempt status by the IRS. This means that the nonprofit organization is typically not responsible for paying income tax, property tax, orsales tax. But to be tax exempt, most organizations must apply fortax-exempt statusthrough the IRS.

Here are a few nonprofit organization examples:

• Hospitals
• Public schools
• National charities
• Foundations
• Churches (e.g., synagogues, mosques, and temples)
• Museums
• Research institutes
• Labor unions

Donations you make to a nonprofit are typically tax-deductible, and the nonprofit does not pay tax on the received donations.

Nonprofit vs. not-for-profit

You may be thinking, “Oh, I’ve heard of a not-for-profit before.” Although they sound similar, nonprofits and not-for-profits are not one and the same.

So, what is anot-for-profit? Like a nonprofit, a not-for-profit does not earn profits for its owners. However, not-for-profits are not required to benefit the public good. This means that a not-for-profit can exist to solely serve its members’ goals.

A not-for-profit may include clubs, such as a soccer club, women’s club, or another association formed by a group of people. The not-for-profit can use its funds to fulfill its organizational objectives, goals, etc. On the other hand, nonprofits generally include organizations with charitable purposes, such as educational or research purposes.

Types of nonprofits

There are quite a few different types of nonprofits. Let’s go through a few of them:

• 501(c)(1): Corporations Organized under Act of Congress
• 501(c)(2): Title Holding Corporation For Exempt Organization
• 501(c)(3): Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations
• 501(c)(4): Civic Leagues, Social Welfare Organizations, and Local Associations of Employees
• 501(c)(5): Labor, Agricultural, and Horticultural Organizations
• 501(c)(6): Business Leagues, Chambers of Commerce, Real Estate Boards, etc.
• 501(c)(7): Social and Recreational Clubs
• 501(c)(8): Fraternal Beneficiary Societies and Associations
• 501(c)(9): Voluntary Employees Beneficiary Associations
• 501(c)(10): Domestic Fraternal Societies and Associations

For more information on all the types of nonprofits, check outIRS Publication 557.

Qualifications of nonprofit organization status

To qualify for NPO status, an organization must meet the following requirements:

• Have a mission to further religious, scientific, charitable, educational, literary, public safety or cruelty-prevention causes or purposes
• Serve the public in some way, whether it’s to offer goods, services, or both
• Make financial and operating information public
• Not participate in any political activities or incur any expenditures for political activities
• Maintain compliance with the agency that regulates charitable organizations (if applying and receiving tax-exempt status)

Keep in mind that each state has different rules, regulations, and fees when starting a nonprofit organization. Check with your state to find out more information if you’re interested in forming a nonprofit.

Benefits of nonprofits

Thinking about starting a nonprofit? Just curious what the upsides and downsides of nonprofits are? Check out some pros and cons below.

Advantages:

• Doing good for a cause
• Tax exemption
• Personal liability protection

Disadvantages:

• Lots of paperwork
• Limited funding
• Must makefinancial statementspublic

Regardless of whether you run a nonprofit or small business, you need an easy way to track income, expenses, and more. Patriot’s118bet金博宝 lets you streamline your accounting process so you can get back to business. Start your free trial today!

This is not intended as legal advice; for more information, pleaseclick here.