Types of Nonprofits: A Comprehensive Guide

Nonprofit Management

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Understanding the different types of nonprofits and their IRS classifications is crucial if you’re looking to make a positive impact in your community by starting a nonprofit. The diverse amounts of nonprofits play a vital role in addressing societal needs and helping their communities. Once you know more about how your new nonprofit is classified, you can start the initial steps of setting up your organization to start changing the world. 

What is a nonprofit organization?  

A nonprofit organization, or charitable organization, is an established group that operates without making a profit with the goal of furthering a particular social cause or advocating for a specific point of view, rather than creating income for its executives or shareholders. Nonprofits can focus on a wide range of causes, including charitable, educational, religious, scientific, humanitarian, or environmental missions. 

These organizations often depend on donations from their supporters, as well as grants, and other forms of funding to support their operations while pursuing their mission with any surplus being reinvested into the organization’s cause instead of being distributed to shareholders. Nonprofits usually hold tax-exemption status with the IRS, which means they don’t need to pay income tax on the money they receive or generate for their cause. This quick guide outlines how to start a nonprofit in 10 steps.

What is an NGO (Non-Governmental Organization)? 

An NGO is a type of nonprofit organized at the local, national, or international level that works independently of any government involvement. They typically focus on social, political, environmental, and humanitarian objectives through advocacy, research and by providing services.  

Why are there different types of nonprofits? 

Nonprofits have many purposes and address a diverse spectrum of societal needs. The diversity provided by having different types of nonprofit organizations ensures a more inclusive approach to addressing social, cultural, environmental, and educational issues. 

Qualifying for tax-exempt status 

The Internal Revenue Service (IRS) provides tax-exempt status to qualifying nonprofits under section 501(c) of the Internal Revenue Code. Section 501(c)(3) covers the most common types of charitable organizations, but your organization may fall under another code depending on your mission. To qualify for tax-exemption, your nonprofit must adhere to your section’s guidelines and file annual reports (Form 990). Compliance with these regulations ensures transparency, accountability, and the continuation of tax benefits for your donors and your organization. 

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Tax exempt organization types  

There are many different types of nonprofits, but here are the most common ones you’ll come across: 

  • Charitable organizations: Charitable organizations focus on providing support to those in need. This type of nonprofit often works in poverty alleviation, healthcare, education, and disaster relief. These organizations’ primary goal is to benefit the public through donations and volunteer efforts to fulfill their mission. 
  • Churches and religious organizations: Religious nonprofits, including churches, mosques, temples, and synagogues, serve spiritual and community needs. These organizations provide religious services, educational programs, and community outreach programs through donations and tithes from their congregations. 
  • Private foundations: Private foundations are entities established by individuals or families to support charitable causes. This type of organization usually supports various initiatives by distributing grants to nonprofits aligned with their mission. 
  • Political organizations: Political nonprofits engage in advocacy, lobbying, and political activities to influence legislation and public policy. This type of nonprofit organization typically works to promote specific issues while maintaining tax-exempt status. 
  • Other nonprofits: Many types of nonprofits don’t fall under a specific umbrella and can be harder to classify. They can be described as cultural institutions, social clubs, and professional associations that pursue specific missions, foster community, support professional development, or promote cultural enrichment that is distinguishable from the other common types of nonprofits. 
volunteers gathered for food distribution representing different types of nonprofit organizations

Types of nonprofits  

Under the IRS’s system, there are many types of tax-exempt organizations. You can use the list below or the IRS’ Tax Exempt Organization Search Tool to discover which type of nonprofit your organization is. 

  • 501(c)(1): This type of nonprofit is for corporations organized under an Act of Congress, such as federal banks and federal credit unions. While the public can make contributions to these organizations, private citizens can’t create one because they’re created by congress. 
  • 501(c)(2): This type of tax-exemption is for exempt organizations to create a corporation to hold the title to property the organization owns to minimize liability risks of losing the property. Because these are title holding corporations only, they can’t accept donations since all revenue goes to the exempt organization that owns the corporation.   
  • 501(c)(3): This is the most common type of nonprofit as it includes organizations that are religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports competition, or prevention of cruelty to children or animals. You must fill out the proper IRS paperwork to receive 501(c)(3) status. 
  • 501(c)(4): This type of nonprofit covers organizations that work for their community but are free to participate in politics to forward their missions. This includes civic leagues, social welfare organizations, and local associations of employees. These organizations are generally unable to accept contributions.  
  • 501(c)(5): Labor, agricultural, and horticultural organizations are covered through this type of tax-exemption by working to improve the conditions of workers who work with crops or livestock. This type of organization can’t accept contributions.   
  • 501(c)(6): This type of nonprofit is for business leagues, chambers of commerce, real estate boards, and other professional associations that are supported by membership dues and income related to their purpose. These organizations are unable to collect donations.  
  • 501(c)(7): Social and recreational clubs that were created to encourage social activity within a community are covered under this tax-exemption status. These organizations can’t accept contributions and are generally funded by membership fees. 
  • 501(c)(8): This type of nonprofit includes fraternal beneficiary societies and associations that provide benefits, such as insurance, to members of the organization through membership fees. These organizations can accept donations but only for specific purposes included in 501(c)(3).  
  • 501(c)(9): Voluntary employees beneficiary associations are tax-exempt nonprofits that cover the benefits to its members and their dependents, such as a labor union. These organizations are funded by their members rather than contributions. 
  • 501(c)(10): Similar to 501(c)(8), this type of nonprofit covers domestic fraternal societies and associations, but these associations can accept donations because they don’t provide benefits to their members.  
  • 501(c)(11): Teachers’ retirement fund associations qualify for this tax-exemption type because they’re created to pay out retirement benefits to former teachers. These associations can’t accept contributions.  
  • 501(c)(12): This type of nonprofit includes benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, and similar organizations for providing their services at the lowest cost possible to their members who fund the organizations.   
  • 501(c)(13): Cemetery companies fall under this type of tax-exemption to sell monuments, markers, vaults, and flowers for the cemetery and can accept donations. These organizations are not able to operate as mortuaries.  
  • 501(c)(14): This type of nonprofit is for state-chartered credit unions, mutual reserve funds, and other financial organizations covered in the Federal Credit Union Act. These organizations can’t earn a profit, nor can they accept contributions.  
  • 501(c)(15): Mutual insurance companies or associations formed in small communities are covered by this tax-exemption because they offer essential services to the members of their organizations. They’re unable to accept donations. 

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  • 501(c)(16): While 501(c)(5) covers organizations focused on agriculture working conditions, this nonprofit type covers cooperative organizations to finance crop operations for members of the organizations. Just like 501(c)(5), they also can’t accept contributions. 
  • 501(c)(17): Supplemental unemployment benefit trusts are covered under this type of nonprofit to pay any former employee without discrimination. These trusts are unable to accept donations from the public. 
  • 501(c)(18): Similar to 501(c)(17), this type of tax-exempt trust covers employee funded pension trusts that were created before June 25, 1959, and are only funded by the employees. 
  • 501(c)(19): This type of nonprofit covers posts or organizations of past or present members of the Armed Forces in America. These organizations must be comprised of at least 75% of past or present members of the Armed Forces. Generally, they don’t accept contributions.  
  • 501(c)(21): Black lung benefit trusts are covered by this tax-exemption type and are trusts created to pay coal miners who were fully disabled from black lung disease as determined by the Federal Black Lung Benefit Act of 1969 that was amended in 1977 to hold the funds in trusts.  
  • 501(c)(22): Withdrawal liability payment funds are covered under this tax-exemption and are created by the United States government to meet the liability when withdrawing money from multiemployer pensions.  
  • 501(c)(23): With the same Armed Forces requirements as 501(c)(19), this type of nonprofit covers veterans’ organizations, but specifically organizations created before 1880 to provide insurance benefits to veterans.   
  • 501(c)(25): This type of nonprofit covers title holding corporations or trusts for real estate with multiple parent corporations for up to 35 shareholders or beneficiaries. This type of organization is unable to accept contributions.   
  • 501(c)(26): State-sponsored organizations providing health coverage for high-risk individuals are covered under this tax-exemption. Because they’re state-sponsored organizations, they don’t accept donations.  
  • 501(c)(27): Organizations under this designation are state-sponsored workers’ compensation reinsurance organizations that were formed before June 1, 1996, to cover the return of extra income to worker’s compensation policyholders. These organizations can’t accept contributions.  
  • 501(c)(28): The National Railroad Retirement Investment Trust is covered under this tax-exemption as of February 2002 to provide retirement benefits to railroad workers and their dependents and is funded by its beneficiaries.  
  • 501(c)(29): This type of tax-exemption is for co-op health insurance issuers who receive grants under Medicare or Medicaid services as part of the Affordable Care Act.    
  • 501(d): Religious and apostolic associations that share a community treasury through a business that benefits its members can file under this tax-exemption status. Members must belong to the registered church group.  
  • 501(e): Cooperative hospital service organizations are covered under this tax-exemption if they provide data processing, purchasing, warehousing, billing and collection, food, clinical, industrial engineering, laboratory, printing, communications, record center, or personal services to at least two hospitals.  
  • 501(f): This type of nonprofit covers cooperative service organizations operating educational organizations where members of educational organizations invest in stocks and reinvest any income gained for the benefit of its members.  
  • 501(k): Publicly available child care organizations fall under this type of nonprofit to provide childcare to the general public in order for their parents or guardians to be employed.   
  • 501(n): This type of tax-exempt organization is for charitable risk pools that pool the insurance risks of members for a charitable cause outside of medical malpractice. These risk pools must raise $1,000,000 in startup capital from non-charitable organizations to qualify for this status. 
person filling in paperwork for types of nonprofit organizations

Ready to get started?  

If you’re interested in starting your own nonprofit organization, here are three steps to help you get started!  

1. Choose your nonprofit’s classification 

Start your nonprofit journey by identifying the focus of your organization. Will it be a charitable organization, religious institution, educational foundation, or another type of nonprofit? Your IRS classification determines the activities you can engage in and the regulations you have to follow. Research existing nonprofits with similar missions to help you identify any gaps or unique contributions your organization can provide. 

2. Establish your mission and vision 

Your mission and vision statements are one of the key ways potential supporters and the IRS can tell what your nonprofit is working towards. Clearly define your nonprofit’s mission and goals to show the impact you aim to achieve and what part of the community or cause you intend to serve. Your mission statement guides your organization’s activities and helps distinguish your nonprofit from others!  

3. File your state and federal paperwork 

To operate as a nonprofit, you must fulfill the legal requirements and paperwork required by state and federal authorities. This usually involves registering your organization with the appropriate state agency and obtaining tax-exempt status from the IRS. These regulations help ensure your nonprofit’s legal recognition and eligibility for tax benefits. If you’re concerned you’ll miss something when registering your nonprofit, seek professional assistance to file correctly.  

Final thoughts  

Different types of nonprofits play vital roles in shaping our society. Whether these organizations focus on charity, religion, education, advocacy, or other altruistic purposes, nonprofits’ mission-driven nature and contributions to the public good are why they are permitted to file under one of the IRS classifications listed earlier.

There are over 1.8 million nonprofit organizations in the United States working to make the world a better place, and with some hard work and dedication, your organization can join the ranks to make a difference.  

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