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The verbiage utilized to outline trade and professional entities will sometimes cause a great deal of confusion, which is why it is important to to clarify two key terms. Associations are typically assembled and operated as both nonprofit and tax-exempt entities. Nonprofit status makes reference to incorporation status under state law; tax-exempt status references federal income tax exemption under the Internal Revenue Code. Many people are under the impression that Non-Profit status will automatically make their entity tax exempt, so it is imperative to understand the difference.

  • Nonprofit status refers to status under state law.
  • Tax-exempt status refers to federal income tax exemption under the Internal Revenue Code (the “Code”) and to certain state taxes.

The phrase Non-Profit by and large is utilized to represent an organization that functions to serve a public objective, compared to provide financial gains to individuals, corporations or entities. Nonprofits are typically created to benefit a particular cause or provide community assistance or public objective.

Tax-exempt status absolve a nonprofit entity from incurring costs from corporate income tax on revenue that is accumulated from operations that are for the most part associated to the purposes for which the entity was created. The entities are often incorrectly referred to as organizations “501(c)’s” or “501(c)(3)’s”. These letters and numbers actually refer to a specific tax category in the Internal Revenue Code. Organizations must be considered “charitable” by the IRS to receive a 501(c)(3) classification. According to the IRS, a charitable organization is one that has been established for the following reasons.

  • Religious
  • Charitable
  • Scientific
  • Testing for Public Safety
  • Literary
  • Educational
  • Fostering of national or international amateur sports, and Prevention of cruelty to animals and children

If you are in the process of staring a Non-Profit 501c3 organization, Nevada Small Business Consulting can assist you. We will be your personal advisor who is available to answer any of your questions or concerns and guide you through the crucial initial phases of establishing your startup. Our consulting services are competitively prices and will can make the difference between success and failure. Contact us today at (702) 758-4691 to schedule a no-cost consultation!