Giving back to your local community by starting a nonprofit Charity organization or ministry can give you a sense of purpose that positively contributes to one’s psychological wellbeing, which is also associated with better physical health. A nonprofit organization is generally to improve the quality of life for others at a community, local, state, national, or even global level. These organizations are not dedicated to private or financial gain but to the advancement of public interest.
While starting a nonprofit Charity organization or religious organization is an exciting and rewarding opportunity, it can also be challenging. A nonprofit organization commonly performs some type of public or community or religious benefit, without the purpose of making a profit. There are various categories of nonprofits recognized by the Internal Revenue Service (IRS):
A nonprofit is an organization that qualifies for tax-exempt status under the regulations outlined by the Internal Revenue Code. Each category has different tax benefits and requirements. While the majority of nonprofits are classified under 501(c)(3) of the IRS Code as charitable organizations.
Types of Nonprofits
Charitable or Religious Organizations
A charitable organization or charity is a non-profit organization whose primary objectives are philanthropy meaning they desire to promote the welfare of others, expressed especially by the generous donation of money to good causes. And social well-being (e.g. charitable, educational, religious, or other activities serving the public interest or common good).
Examples: Charitable Organization:
The exempt purposes set forth in Internal Revenue Code section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals.
The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
Social welfare organizations
A social welfare organization is a nonprofit civic organization operated under Internal Revenue Code section 501(c)(4)exclusively for the promotion of social welfare; and. local associations of employees whose earnings are devoted to charitable, educational, or recreational purposes.
Examples: Some nonprofit organizations that qualify as social welfare organizations include:
- An organization operating an airport that serves the general public in an area with no other airport and that is on land owned by a local government, which supervises the airport’s operation,
- A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs and meetings; and contracts with a private security service to patrol the community,
- A community association devoted to preserving the community’s traditions, architecture and appearance by representing it before the local legislature and administrative agencies in zoning, traffic and parking matters,
- An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area and
- An organization that holds an annual festival of regional customs and traditions.
Other Types of non-profits:
- Labor and agricultural organizations
- Business leagues
- Veterans organizations
Why Incorporate a Nonprofit ?
For organizations seeking tax exemption, incorporation is the first step . … The primary reasons for incorporation are limited liability protection of the directors, credibility, and tax purposes.
Forming a nonprofit corporation, a legal entity, is different from federal or state tax exemption. Incorporating a non-profit is similar to creating a regular corporation except that you have to take the extra steps of applying for tax-exempt status with the IRS and their state tax division.