A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit. Donations made to a nonprofit organization are typically tax-deductible to individuals and businesses that make them, and the nonprofit itself pays no tax on the received donations or on any other money earned through fundraising activities. Nonprofit organizations are sometimes called NPOs or 501(c)(3) organizations based on the section of the tax code that permits them to operate.

KEY TAKEAWAYS
A nonprofit is an entity designed to better its community by facilitating donations and grants into programs.
Nonprofits may receive funding from individuals, corporations, government entities, or other entities.

To qualify as a nonprofit, the entity must serve the public good, meet filing requirements, be established as a 501(c)(3) or similar-type organization, and avoid engaging in certain types of activities.

Nonprofits file Form 990 as an informational return to communicate to the public its revenues, expenses, activities, and programs.

Though nonprofits often have the most passionate individuals and diversified donation streams, nonprofits also often have limited resources for hiring and regulatory requirements.