What is a Nonprofit Organization?

Nonprofit organizations include a wide variety of activist, civic, religious, public service, and public broadcasting organizations that have to goal of serving the public interest rather than the goal of making money. These organizations may operate at the local, state, national, or international level. To qualify for nonprofit status in the United States, an organization must be approved by the IRS. The organization is then exempt from paying taxes which would be levied on a for-profit business.

Only specific types of organizations can qualify to be nonprofit. Nonprofits are recognized and authorized by Congress, which determined that certain types of enterprises should be free from the burden of having to pay income taxes. To accomplish these goals, it established a class of entity now known as a tax exempt corporation, or nonprofit corporations.

In giving these corporations tax exempt status, however, Congress imposed specific requirements and limitations on their activities. The IRS tends to strictly enforce these rules otherwise the organization will lose its tax exempt status.
A nonprofit corporation is not prohibited from making a profit, but there are limitations on what it can do with its profits. There are also limitations on how it can make money - and it must make money in accordance with its nonprofit purposes.