nonprofitstatus

Nonprofit status refers to a designation granted by a government that allows an organization to operate without distributing profits to private individuals. Organizations with nonprofit status are typically organized for charitable, religious, educational, scientific, literary, or humanitarian purposes. They must reinvest earnings in their mission and are generally prohibited from distributing profits to founders or shareholders.

To obtain nonprofit status, an entity must meet legal requirements in its jurisdiction, including establishing a governing board, creating bylaws, and filing articles of incorporation. In many countries, organizations apply for tax-exempt recognition, which may require demonstrating charitable intent and public benefit. Ongoing compliance includes annual filings, financial reporting, and adherence to restrictions on private benefits.

Tax-exempt status can provide benefits such as exemption from income tax and eligibility to receive tax-deductible donations. Eligible donors can deduct contributions in some jurisdictions. However, nonprofit status comes with limits on political activities and lobbying in many places, and earnings must not benefit private individuals.

Common forms vary by country: in the United States, 501(c)(3) organizations include charities and educational groups; 501(c)(4) social welfare groups exist alongside other 501(c) categories; many countries have their own charitable recognition schemes, often overseen by a government department or agency. In the United Kingdom, charities are registered and regulated by the Charity Commission (and equivalents exist for Scotland and Northern Ireland).

Dissolution rules: upon dissolution, assets typically must be transferred to another nonprofit with similar purposes, rather than distributed to members or private individuals.