A nonprofit organization has a mission to benefit the public rather than generating profit. This might include religious, charitable, educational, scientific, or social welfare causes. Because a nonprofit organization serves the public good it can qualify for tax-exempt status with the IRS.
Main advantages:
- Personal liability protection
- No federal or state corporate income tax for 501(c)(3) organizations
Main drawbacks:
- Fundraising can be challenging and is impacted by changes in the economy
- Members of the board of trustees can't be paid for their service
- You must manage a lot of paperwork and record keeping to remain compliant with the IRS and transparent about business operations
If you are unsure of which structure is best for your business, talk to a business advocate on our chat or seek professional advice from an attorney or accountant.
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