Nonprofit Organizations

A nonprofit organization is a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members, directors or officers.

Nonprofit organizations may take the form of a corporation, individual enterprise (e.g., individual charitable contributions), unincorporated association, partnership, foundation (distinguished by its endowment by a founder, it takes the form of a trusteeship) or condominium (joint ownership of common areas by owners of adjacent individual units incorporated under state condominium acts). Nonprofit organizations must be designated as such when created and may pursue only purposes permitted by statutes for nonprofit organizations.

For nonprofit corporations, some states have adopted the Revised Model Non-Profit Corporation Act (1986). For nonprofit associations, a few states have adopted the Uniform Unincorporated Non-Profit Association Act. States may exempt nonprofit organizations from state tax and employment programs. Some states give nonprofit organizations immunity from tort liability, and other states limit tort liability by enacting a damage cap. State law also governs solicitation privileges and accreditation requirements, such as licenses and permits.

Each state defines “nonprofit” differently. Some states make distinctions between organizations not operated for profit without charitable goals (e.g., a sports or professional association) and organizations with charitable associations.

For federal tax purposes, an organization is exempt from taxation if it is organized and operated exclusively for religious, charitable, scientific, public safety, literary, educational, prevention of cruelty to children or animals, or development of national or international sports purposes.

Last updated: Sept. 30, 2008

The content on this page was developed in partnership with the Legal Information Institute, Cornell Law School.