What Is a Nonprofit Organization?

A nonprofit organization is an entity that is created and operated for charitable or socially beneficial purposes rather than to make a profit. Donations made to a nonprofit organization are typically tax-deductible, and the nonprofit itself pays no tax on donations or money earned through other fundraising activities.

Nonprofits play a vital role in society by addressing various social, cultural, and environmental issues. They contribute to the well-being of communities by providing essential services, promoting education, and advocating for positive change.

There are several types of nonprofit organizations, including 501(c)(3) charitable organizations, 501(c)(4) social welfare organizations, and 501(c)(6) business leagues. Each type of nonprofit has its own specific purpose and requirements for obtaining tax-exempt status.

Nonprofits file Form 990 with the IRS to report their revenues, expenses, and activities. This tax form provides information about the organization's finances, programs, and activities to the public and the IRS. Many nonprofits post their completed 990 forms on their websites so that donors, stakeholders, and members of the public can review the organization's financial information and assess its operations and impact.