Nonprofit organizations are an integral part of our society, providing goods and services to the public while also serving a group of members. In the United States, there are more than 1.6 million nonprofit organizations, each of which falls into one of the 26 categories outlined by the Internal Revenue Service (IRS).
Nonprofit organizations
can range from incredibly broad to highly specific, and many foundations focus on finding worthy nonprofits to support through donations and guidance. It is important to note that 501(c)(3) organizations cannot donate to political campaigns, but other types of nonprofits can.The purpose of these non-profit organizations is to organize activities that bring pleasure, recreation, and socialization. Common types of nonprofit organizations include public charities, foundations, social defense groups, and commercial organizations. Nonprofits are exempt from paying taxes by the IRS as they are a benefit to the public, and they must keep their financial information public to ensure that donations are used only for the promotion of the nonprofit organization. Before you continue to grow your organization or plan to create a new one, it is essential to understand the different types of nonprofit organizations and how these distinctions affect fundraising and operations.
Most nonprofit organizations comply with 501(c) standards, but it is still essential that nonprofit leaders understand what this means and how it differs from other types of nonprofits. For example, 501(c) nonprofits can exert pressure on the government, but no more than 10% of operating expenses can be used for this purpose. Some well-known examples of 501(c)(3) organizations include the Knights of Columbus and the Shriners. Since most nonprofits in the United States are 501(c)(3), this is likely where you should start your research if you're thinking about creating a nonprofit organization.
If you're considering creating a nonprofit organization, it's important to know about the different types of nonprofit designations. You'll need to identify how your nonprofit will raise funds, what donors receive in return (if anything), and how you'll confirm these gifts with a donation receipt that meets tax requirements. Knowing more about the nonprofit ecosystem can also help you become a better nonprofit leader and have a more holistic view of different organizations and how they work together. One type of nonprofit organization designation is 501(c)(1).
There is no application form for this type of nonprofit organization, but 501(c)(1) nonprofits must submit Form 990 or 990EZ annually. The mission of a nonprofit organization is to tell the government whether or not it qualifies for a tax exemption, and then it will tell the organization how to apply for that exemption. It's important to understand what your organization can (and cannot) do in order to guarantee and maintain your nonprofit status with or without tax exemption.
