How do nonprofit owners make money?

Nonprofits receive revenue through sources like grants, donations, and membership programs. They use their revenue to pay for expenses needed to operate their business, including employee salaries.

Are there other names used for a nonprofit?

There are a variety of terms used for nonprofits. You may see a nonprofit organization called an NPO. If an organization serves a group of members rather than the general public, it may be called a non-for-profit organization. An example of a nonprofit institution is a public university. Sometimes you'll see tax-exempt organizations casually referred to as "501c3 nonprofits."

What is the difference between a nonprofit and for-profit corporation?

A key difference is that a for-profit company can distribute earnings to owners or shareholders, while a nonprofit is restricted from doing so. It's crucial to maintain tight controls over an organization's net earnings and finances to maintain this distinction.

What is a disadvantage of a nonprofit?

Because nonprofit corporations have boards of directors to consult, nonprofits can be slower to act on opportunities than nimble startups.

Is a nonprofit the same as a corporation?

A nonprofit may be formed as a corporation, but it is possible to create other nonprofit entities, such as a nonprofit LLC.

What is the difference between an LLC and a 501(c)(3) organization?

An LLC is a type of business legal entity, while the term 501(c)(3) refers to any organization that's been granted tax-exempt status by the IRS under that specific section of the Internal Revenue Code.

What does 501(c)(3) actually refer to?

It's a section of the Internal Revenue Code—26 U.S.C. § 501(c)(3)—that makes qualifying organizations exempt from federal income tax and allows them to accept tax-deductible donations.

Which groups qualify for 501(c)(3) nonprofit status?

In addition to satisfying various IRS requirements, eligible organizations must generally be involved in religious, charitable, scientific, public safety, literary, or educational activities.

Which groups don't qualify for 501(c)(3) nonprofit status?

Civic leagues, homeowners associations, social welfare organizations, and political organizations are common types of nonprofits that don't qualify for 501(c)(3) status. However, they may qualify for a tax exemption under other sections of the Internal Revenue Code.

How do I keep my tax-exempt status?

Maintaining your tax-exempt status requires year-round compliance, including recording all finances and expenses, remaining compliant with nonprofit bylaws, and filing Form 990 annually with the IRS.

What's the difference between a public charity and a private foundation?

Both public charities and private foundations have 501(c)(3) status, but how they get funding differs. Public charities typically get funding from the public and government. Private foundations typically get donations from a few individuals, a family, or a corporation. Regardless of the funding source, none of the earnings can be distributed to private shareholders or individuals.

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Name: NonProfit
Brand: LegalZoom
Price: 99 USD
Availability: OnlineOnly

We've helped over 100,000 nonprofit organizations get started—let us help you form yours, too. As a nonprofit corporation, you can apply for grants, get 501(c)(3) tax-exempt status if eligible, and protect your assets.

Starts at $99 + filing fees. These costs are often tax deductible.

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Why use LegalZoom to set up your nonprofit?

Get started in minutes

You can register your nonprofit organization in 3 easy steps with the leader in online business formation. We'll assemble your documents and file them directly with the Secretary of State.

Set it up right

Our tools offer step-by-step guidance to help you launch your nonprofit. We can file it with the state and apply for tax-exempt status as a 501(c)(3) organization at the same time.

Get the help you need

You get lifetime customer support and 100% customer satisfaction guaranteed. And we offer access to a network of attorneys to guide your launch and help your nonprofit grow.

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$99 + state filing fees

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Preliminary name clearance
Articles of incorporation filing with your state
for missing info, discrepancies, and more

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$239 + state filing fees

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Everything from Economy plus:

Deluxe founder's kit with your formation documents printed on archival paper, plus a personalized binder and notebook
Corporate minutes forms to record formal meetings and actions

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$359 + state filing fees

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Everything from Standard plus:

Faster filing of your articles of incorporation with the state
Expedited federal tax ID (EIN)
Delivery of your package 2-3 business days after everything is finalized
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How to start a nonprofit with LegalZoom—it's easy!

Tell us your nonprofit name
Answer some questions online
We'll complete and file your paperwork

We can help you with the rest, too!

Get an EIN (Employer Identification Number)
File for 501(c)(3) tax-exempt status
Obtain a list of required licenses

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What is a nonprofit?

Nonprofit organizations are groups organized for a good cause rather than for profit. None of a nonprofit organization's income is distributed to its members, directors, or officers.

What causes are eligible for a tax-exempt designation?

A nonprofit designation and a tax-exempt status are given only to nonprofit organizations that further certain causes. For example, organizations with religious, scientific, charitable, educational, literary, sports competition, cruelty-prevention, or public safety purposes would qualify.

Why start a nonprofit?

Get tax breaks

You're eligible to apply for state, federal, and other tax exemptions.

Apply for 501(c)(3) status

Contributions to certain types of qualifying nonprofits are tax deductible.

Protect your assets

Members and directors are shielded from personal liability for the nonprofit's actions.

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How to start a nonprofit in 5 steps

Conduct a needs assessment

Describe your nonprofit's mission, strengths, weaknesses, and the need it will fill to determine how to serve your community.

Complete a market analysis

Plan outreach, fundraising, and volunteer support by analyzing the market opportunity.

Create a business plan

Include services, community impact, business operations, marketing, and sources of funding.

Form your nonprofit

Make it official with a name, a business structure, filing with the state, and getting an EIN when you form your nonprofit with us.

Apply for tax-exempt status as a 501(c)(3) nonprofit if eligible

Let us know if you'd like us to file your IRS application form for you.

Advantages and disadvantages of a nonprofit

Advantages of a nonprofit

Work on solving issues, creating change, and giving back
Obtain Internal Revenue Code 501(c)(3) tax-exempt status if eligible
Qualify for certain government grants and loans
Accept tax-exempt funds from another nonprofit through fiscal sponsorship
Pay yourself a fair salary as part of operating expenses

Disadvantages of a nonprofit

Maintain records of donations, grants, funding, operational expenses, and finances
File an annual information return with the IRS to maintain your tax-exempt status
Stay compliant with bylaws that dictate how the nonprofit must be governed
Disclose salaries and finances for public inspection

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What qualifies as a 501(c)(3) nonprofit?

The main requirements are to operate exclusively for religious, charitable, scientific, or educational purposes (among others) and to file annual reports with the IRS.

What is a 501(c)(3) not allowed to do?

Organizations can lose their 501(c)(3) tax exempt status by distributing earnings to shareholders, engaging in political activity or substantial lobbying, or failing to pursue their stated charitable or other qualifying purpose.

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What is the difference between a nonprofit and a 501(c)(3) organization?

Nonprofits are organized for purposes other than generating profit and they don't distribute any income to their shareholders. 501(c)(3) refers to a specific tax status in which an organization does not have to pay federal income tax and can accept tax-exempt donations from the public.

Nonprofit (without 501(c)(3) status)	501(c)(3) organization
Paperwork:	Save time and money by not applying for tax-exempt status with the IRS.	File annually with the IRS to document compliance for retaining tax-exempt status.
Donations/grants:	Can't accept tax-deductible contributions or grants.	May collect tax-deductible donations and grants.
Earnings:	Pay federal taxes on earnings.	Earn income that is federally tax-exempt.

Undecided if you'd like us to file for 501(c)(3) status?

You can always start your nonprofit now and decide later if you want to apply for 501(c)(3) status.

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What is the difference between an LLC and a nonprofit corporation?

In most cases, nonprofits are formed as a corporation, but an LLC can also be a nonprofit. Incorporating helps protect your personal assets, builds credibility with potential donors, and unlocks funding reserved for officially formed nonprofit corporations.

Nonprofit corporation	Nonprofit LLC
Structure of nonprofit:	Operate within a rigid structure, including requirements for shareholders, directors, and managers.	Choose an organizational structure that best fits your needs, with the flexibility to make changes.
Requirements for starting:	Follow basic steps—choose a name, set up a board of directors, file incorporation documents, get an EIN, and obtain any licenses.	Can be complicated—additional steps are required vs. starting a nonprofit corporation. Plus, nonprofit LLC's are not available in all states.
How to be tax-exempt:	File Form 1023 with the IRS to apply for tax-exempt status under section 501(c)(3).	Elect for LLC to be taxed as a corporation. Then file Form 1023 with the IRS to apply for tax-exempt status under section 501(c)(3). Tax-exempt status is available only if all members of the nonprofit LLC are themselves 501(c)(3) tax-exempt organizations.

What are the 3 types of nonprofits?

Nonprofit corporation

The most popular type of nonprofit, these nonprofits can qualify as tax-exempt, are generally protected from liability, and are eligible for grants.

Nonprofit LLC

A nonprofit LLC can only be recognized as a 501(c)(3) organization if all of its members are 501(c)(3) nonprofit organizations.

Nonprofit association

An association is when two or more people come together to benefit the public without filing legal paperwork or forming an official legal structure.

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What our customers are saying

I am absolutely impressed with LegalZoom's ability to complete my nonprofit business and 501(c)(3) in such a short period of time.

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