You often hear the term non-profit organization, but what does that mean? What sets a non-profit organization apart from something such as a standard corporation? How about an LLC? The Internal Revenue Service recognizes non-profit organizations and understanding how they differ from for-profit entities in the eyes of the IRS is important.
The Internal Revenue Service recognizes a total of 30 different types of non-profit organizations. They are exempt from federal taxes, as well as many state taxes. The whole premise of a non-profit is that the goal is to break even on the financial side of the house. The determination by the IRS dictates requirements around tax return filings and overall organization. The most common type is a 501©(3) organization. These are non-profits that do not qualify as a public charity but are instead a private foundation. Even though non-profit organizations are exempt from taxes, running the day to day operations will require you to get a tax ID number for your non-profit. This will allow you to perform basic tasks such as opening a bank account and filing taxes.