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A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive.

Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. Like for-profit corporations, nonprofit corporations must file a statement of corporate purpose with the Secretary of State and pay a fee, create articles of incorporation, conduct regular meetings, and fulfill other obligations to achieve and maintain corporate status.

Nonprofit corporations differ from profit-driven corporations in several respects. The most basic difference is that nonprofit corporations cannot operate for profit. That is, they cannot distribute corporate income to shareholders. The funds acquired by nonprofit corporations must stay within the corporate accounts to pay for reasonable salaries, expenses, and the activities of the corporation. If the income of a corporation inures to the personal benefit of any individual, the corporation is considered to be profit driven. Salaries are not considered personal benefits because they are necessary for the operation of the corporation. An excessive salary, however, may cause a corporation to lose its nonprofit status.

Nonprofit corporations are exempt from the income taxes that affect other corporations but only if they conduct business exclusively for the benefit of the general public. State laws on corporations vary from state to state, but generally states give tax breaks and exemptions to nonprofit corporations that are organized and operated exclusively for either a religious, charitable, scientific, public safety, literary, or educational purpose, or for the purpose of fostering international sports or preventing cruelty to children or animals. Nonprofit organizations may charge money for their services, and contributions to tax-exempt nonprofit organizations are tax deductible. The Internal Revenue Service must approve the tax-exempt status of all nonprofit organizations except churches.

A vast number of organizations qualify for nonprofit status under the various definitions. Nonprofit organizations include churches, soup kitchens, charities, political associations, business leagues, fraternities, sororities, sports leagues, Colleges and Universities, hospitals, museums, television stations, symphonies, and public interest law firms.

A nonprofit corporation with a public purpose is just one organization that qualifies for tax-exempt status. Under Section 501 of the Internal Revenue Code (26 U.S.C.A. § 501), more than two dozen different categories of income-producing but not-for-profit organizations are exempt from federal income taxes. These other tax-exempt organizations include credit unions, civic leagues, recreational clubs, fraternal orders and societies, labor, agricultural, and horticultural organizations, small insurance companies, and organizations of past or present members of the armed forces of the United States.

The number of nonprofit corporations in the United States continued to increase into the twenty-first century. Although nonprofit corporations cannot produce dividends for investors, they provide income for the employees, and they foster work that benefits the public.

The activities of nonprofit corporations are regulated more strictly than the activities of other corporations. Nonprofit corporations cannot contribute to political campaigns, and they cannot engage in a substantial amount of legislative Lobbying.

Further readings

Barrett, David W. 1996. "A Call for More Lenient Director Liability Standards for Small, Charitable Nonprofit Corporations." Indiana Law Journal 71 (fall).

Hammack, David C., ed. 1998. Making the Nonprofit Sector in the United States. Bloomington: Indiana Univ. Press.

Ott, J. Steven, ed. 2001. Understanding Nonprofit Organizations: Governance, Leadership, and Management. Boulder, Colo.: Westview Press.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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Glenn Branch is deputy director of the National Center for Science Education, a nonprofit organization that defends the teaching of evolution in the public schools.
The following can be used by nonprofit organizations as guide to develop or modify its written audit committee charters.
Those involved with nonprofit organizations criticize only those elements of the government's reform outline that address taxation and financing.
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Religious groups, nonprofit organizations, and supporters across the nation have joined with SEIU's Justice for Janitors movement to win better pay, health care, and training programs that provide more good jobs and an improved standard of living for our communities.
A new nonprofit organization has been formed to disseminate financial information on nonprofits over the Internet.
This directory is published by Disability Resources, Inc., a nonprofit organization. They also publish a newsletter, Disability Resources Monthly (on audiotape as well as in print), and have a terrific Web site <>.
Kamath, M.D., from the Northwestern University Feinberg School of Medicine in Chicago, and colleagues conducted a nationwide, cross-sectional study to examine the alignment of cancer burden by histology with nonprofit organization funding for each histology.
A committed mentor, Jones in 2017 won the inaugural Girl Legacy award from Community Bridges, a Silver Spring nonprofit organization dedicated to empowering girls, for her work helping young women get into and through college.
Imagine a world without a single nonprofit organization. A world without local food banks, community outreach programs, and free health services for those who need them most.

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