Nonprofits are sometimes referred to as non-stock corporations or 501(c)(3) organizations. Nonprofits typically must pay employment taxes for hired staff while enjoying federal tax benefits on income. Any profits generated by these organizations are not distributed to shareholders or owners. Additionally, nonprofits do not issue stock.
Common Types of Nonprofit Organizations
- Public charities
- Foundations
- Social advocacy groups
- Trade organizations
Charities and Their Purposes
The most common nonprofit is a charity, which refers to an organization that operates to fulfill any of the following purposes:
- Religion
- Education
- Science
- Literature
- Public safety testing
- Amateur sports
- The prevention of cruelty to children or animals
Over 1 million charities exist in the U.S. These nonprofits contribute 75% of the $3.67 trillion reported in revenue and expenses for the whole nonprofit sector.
Sub-categories of 501(c)(3) Organizations
Within 501(c)(3) there are additional types of charities:
- Private foundations
- 509(a)(1)
- Religious
- Scientific
- Literary
Other Nonprofit Categories
501(c)1 Organizations
Federal credit unions exemplify 501(c)1 organizations, which are not required to apply for tax-exempt status or file annual tax returns because they were organized by Congress.