Nonprofits. You may have heard of them, seen their instagram accounts, or maybe you've even started one. But for those of you haven't, fear not. I'm here to tell you exactly what a nonprofit is and discuss their many (many) classifications.
In short, nonprofits are exactly what they say they are: not-for-profit organizations. But what does that actually mean? 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.
Now that we all know exactly what a nonprofit is, let's talk about the various types.
When I decided I wanted to write this post, I was ready to talk about the 3 or 4 classifications of nonprofits and call it a day. Upon further research, I discovered that there were over 30! (Shocking, right?!) So, for your sake (and mine), I'll go into detail about 3 of the most popular nonprofit classifications.
The 3 Most Popular Nonprofit Classifications
501(c)3- If you come across a nonprofit, chances are it's a 501(c)3, the most common type of nonprofit.
It includes a wide range of organizations, including ones that are religious, educational, charitable, scientific, literary, groups that test for public safety, organizations that foster national or international amateur sports competition, or organizations engaged in the prevention of cruelty to children or animals. (I told you it was a wide range!)
All 501(c)(3) organizations are considered either a private foundation or a public charity . Private foundations are nonprofits that don't qualify as public charities. Foundations may be sub-classified as private operating foundations or private non-operating foundations and receive some of the advantages of public charities. Public charities are the organizations to which we typically donate. Well-known public charities include the Red Cross and The Boys & Girls Club.
501(c)4- A 501(c)4 can be classified as a civic league, social welfare organization with local associations of employees, or an organization created to promote community welfare for charitable, educational or recreational purposes.
The purpose of a 501(c)4 is to support individuals within the group as well as the general welfare of the organization’s members.
Some examples of a 501(c)4 include AARP and Equality Texas.
501(c)7- A 501(c)7 is defined as a social or recreation club.
The purpose of these nonprofit organizations is to organize activities that lead to pleasure, recreation, and socialization.
Common examples include hobby groups, country clubs, and sports leagues.
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