What Is Non-Profit Organization Entity Type?

A non-profit organization entity is an organization or business that does not make a profit. Any money made through conducting their business goes to enacting its mission rather than earning owners or shareholders money. Examples of non-profits include education programs, community organizations, religious organizations, veteran groups and social clubs.

Forming a Non-Profit Entity

When you form your non-profit organization, it is important to choose the right designation and structure so you do not run into problems down the line. What designates an organization as a non-profit is a tax-exempt status rather than an entity type. The most common business structures for non-profits include:

  • Corporations
  • Trusts
  • LLCs
  • Unincorporated associations

When you consider what type of entity to create for your non-profit organization, it is important to also review the rules for each business structure. Some might require a certain type of oversight. For example, a non-profit corporation generally needs to have a board of directors or board of trustees, and your state might impose certain legal duties that this board must perform.

Applying for Tax-Exempt Status

After incorporating or otherwise filing the paperwork for your business structure and receiving your EIN number, your nonprofit organization must apply for tax-exempt status with the IRS. There are several designations for tax-exempt, but most organizations strive for 501(c)(3) status, which often goes to charitable organizations. This not only exempts the organization from income taxes but it also allows benefactors to deduct donations from their taxes.

If you are a different type of business or organization, you might qualify for one of the other tax-exempt designations depending on your purpose. For example, social clubs fall under 501(c)(7) and veteran’s organizations fall under 501(c)(19) and 501(c)(23).

Another foundational piece of forming your non-profit organization is your IRS-EIN-Tax-ID. You can apply for your non-profit organization tax ID number by clicking the link or you can contact IRS EIN Tax ID Filing Service.