Understanding Nonprofits

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Nonprofits are different from traditional businesses in a lot of ways. The term refers to a business that exists not to make money, but to fulfill a need in the world or a community.

There are several purposes under federal law in which a nonprofit can operate and those are typically charitable, educational, religious, scientific or literary activities.

Incorporated nonprofits can own their own bank accounts and property and file with the IRS to become a tax exempt organization. These are commonly known as 501 (C)(3) organization.

As long as a nonprofit is recognized for the proper purpose, it can take in more money than it expends, which basically means it can make a profit. Two ways of doing this is by fees and fundraising.

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