Non-profit businesses are organizations started for purposes other than making money for their principal owners. Non-profit organizations are granted tax exemptions under Internal Revenue Service (IRS) §501(c)(3) of the US tax code. While several types of businesses may earn the tax exempt non-profit status, they must fall under one of the specified categories under §501(c)(3). The major categories for non-profits businesses are charitable, scientific, literary, public safety and amateur sports.
Charitable non-profit organizations are usually organized as a public charity or private foundation. Public charities may include churches, hospitals, colleges or universities; these organizations have ongoing fundraising activities with funds donated from multiple individuals and companies. Private foundations have one major source of funding, such as a family or corporation, and use their funds to further the efforts of other charitable organizations. Private foundations may also issue grants or awards to individuals for certain goals or achievements.
Scientific non-profit businesses are used to help provide funding for research on current needs in health and human services. Energy, environmental and medical research are types of scientific categories where non-profit businesses can be successful. Scientific organizations help fund research for companies that may be too costly without outside donations. Donations from outside individuals and groups can help non-profits produce valuable scientific information without the constant worries about making profits for shareholders.
Literary non-profit businesses help fund the arts community. This category may include museums, historical centers and other types of community centers. Most literary foundations are started as businesses to help distribute the donations they receive from outside groups. Filing as a non-profit helps maintain their donations inside the business, allowing more funds for their service rather than taxes on profits.
Public safety businesses help inform consumers about product safety and public awareness issues. These businesses may be industry specific, such as the Insurance Institute for Highway Safety, which performs crash tests on automobiles. These organizations act as a watchdog for consumers by providing information about questionable products and services in the marketplace.
Youth leagues and other children’s sports organizations are run as non-profit organizations to provide quality athletic teams for children. These organizations may be headquartered in one state, but they can operate satellite organizations throughout the country. They accept donations from corporations, charitable organizations and dues from parents.