Types of Nonprofit Organizations Overview

A nonprofit organization is a corporation that is formed pursuant to a different state law than a standard for-profit corporation. While a standard corporation is designed to benefit and generate a profit for its shareholders, nonprofits do not have the profit motive.

There are 27 different types of tax-exempt organizations, most of which are organized to engage in special types of nonprofit activity, such as civic, patriotic, recreational, political and social activities. While these groups may qualify for federal tax exemptions under certain provisions of the IRS Code, they don't have all the benefits of 501(c)(3) tax-exempt status.

Certain nonprofit organizations are exempt from federal income taxation, but they may be taxable on income from unrelated businesses they conduct.

Nonprofits fall into one of the following categories:

Public Benefit nonprofits provide a service or product to the public that is generally not offered by for-profit corporations. It does not have a membership that would limit its accessibility to the non-membership public. Examples include schools, libraries and hospitals.

Mutual Benefit nonprofits are formed to serve the members of the organization. Attributes of organization and conduct are usually associated with for-profit entities. Examples are cooperatives, day care centers, nursing homes and trade associations.

Religious nonprofits are organized primarily or exclusively for religious purposes. Churches are an example.