What is a Nonprofit Organization?

Nonprofit Organization

A nonprofit organization is a non-business entity that uses its revenue to further a mission, purpose, or social cause. These business entities can be classified in a variety of categories including charities, ministries, and scientific foundations. Nonprofit entities are required to meet certain criteria to receive tax exempt status. Learn more about nonprofit organizations to discover how it could help make your vision a reality.

Nonprofit Organization Categories

A non-business entity can choose from a variety of categories to properly define the purpose of their organization. A complete list of nonprofit categories can be viewed online by visiting https://www.irs.gov.

Charitable organizations exist to benefit the general public in a positive way. Charities such as United Way and Habitat for Humanity provide basic living needs for people in distress. The American Heart Association and the American Cancer Society provide education and raise money for medical research. Christian organizations such as the Salvation Army and Joyce Meyers Ministries spread the gospel of Jesus Christ and perform mission work.

Trade associations are composed of groups of people that share a similar profession. Popular trade associations include the American Railway Association, Alliance of Automobile Manufacturers, and the Independent Business Alliance. Chambers of commerce and unions also fall under this category.

Political groups form NONPROFIT ORGANIZATIONS to promote policy, issues, and candidates. Examples of political nonprofit organizations include Americans for Prosperity and Gun Owners of America.

Requirements for Nonprofit Status

Non-business entities must meet certain requirements to become a NONPROFIT ORGANIZATION. The requirements include filing articles of incorporation, applying for tax exempt status, and registering your business name.

Articles of incorporation are official documents required by the government to create a corporation. People should be prepared to provide confidential information such as the business name, address, and agent for service of process. Organizations will need to submit 2 copies to the Secretary of State's office and pay any applicable fees.

One of the best advantages of becoming a NONPROFIT ORGANIZATION is obtaining tax exempt status. Non-business entities must be organized and operated for exempt purposes. Shareholders and private investors are not eligible for compensation from a nonprofit organization.

It's important to register your business name so no other company or corporation can use it. The business name cannot be in use by another entity and organizations will be required to pay a fee to register their name.

Funding NONPROFIT ORGANIZATIONS

It can be difficult to find funding for a nonprofit entity. Funding is often available through donations, grants, and fundraisers.

Many organizations rely on personal donations to receive funding for their mission or purpose. Donations can be made in one installment, monthly, or yearly. People are more likely to contribute to a nonprofit organization because their donation will be tax deductible.

Fundraisers are an excellent way to get money for your mission. It's common for scientific organizations to host marathons to collection donations for their cause. Nonprofit entities can also receive donations from large social events.

There are a variety of grants available for NONPROFIT ORGANIZATIONS. People can visit online databases such as Grant Station to find corporations and foundations willing to make contributions to a worthy cause.

A business entity that plans to invest in their mission and cause instead of personal gain might be eligible for tax exempt status. Nonprofit groups must have an exempt purpose such as charity, education, or medical research. NONPROFIT ORGANIZATIONS must file articles of incorporation, apply for tax exempt status, and register their business name.

Related Resource: The 24 Best Masters in Nonprofit Management Online Degree Programs