What Is a Nonprofit?

A nonprofit is a type of organization and legal structure created to help people, solve problems, build community, or support a shared purpose.

Think youth programs, churches, advocacy organizations, animal rescues, museums, schools, scholarship funds, or organizations fighting for causes people care about.

Some nonprofits exist to help the public. Others exist to support a particular industry or group of people, like professional associations, chambers of commerce, alumni groups, or social clubs. Different purpose, same nonprofit family.

You don’t have to start a nonprofit to do good. A fundraiser, community project, or neighborhood initiative can do meaningful work without ever becoming a nonprofit.

No one “owns” a nonprofit.

One thing that surprises many people is that nobody owns a nonprofit. Not even its founder.

Instead, nonprofits are overseen by a board of directors (sometimes called a board of trustees). Their job is to help protect the organization’s purpose and ensure it is being run responsibly.

A nonprofit can and must make money.

A common myth is that nonprofit means “no profit.” It does not.

A nonprofit can earn revenues through donations, grants, membership dues, sponsorships, ticket sales, contracts, product sales, or fees for services. It can even end the year with extra money left over (a profit).

A nonprofit absolutely needs money to survive. Rent is real. Payroll is real. Programs cost money. Websites cost money. Insurance costs money. Existing costs money.

The difference is what happens to the money.

In a nonprofit, money stays with the organization and goes back into the work, for things like programs, staff, technology, savings for hard seasons (reserves), and making sure the organization can actually keep going.

Many nonprofits qualify to be exempt from taxation.

Because nonprofits exist to serve a purpose, many also qualify for tax-exempt status, which means they do not have to pay certain taxes because society recognizes the benefit of the work they do.

But nonprofit and tax-exempt are not automatically the same thing. Becoming tax-exempt usually requires applying for recognition from the IRS (and sometimes the state too).

A nonprofit is still a business.

It is also important to remember that a nonprofit is a business.

A purpose-driven business, yes, but still a business.

That means somebody still has to manage people, money, contracts, deadlines, compliance, technology, and risk. Nonprofits also have to follow laws about employees, discrimination, safety, privacy, contracts, payroll, and finances.

In sum,

A nonprofit is a purpose-driven organization created to help people, solve problems, build community, or support a shared purpose. It uses its income to support that work instead of paying owners and is managed by a board responsible for helping the organization stay focused on its purpose and operate responsibly.