What is a nonprofit? What is a 501(c)(3)?

A 501(c)(3) is considered a charity, and the IRS allows donors to take a tax deduction for contributions of goods, cash and other assets.

A nonprofit corporation is a state entity that does not automatically come with a federal tax exemption. The first step in becoming a nonprofit organization begins with a state registration as a nonprofit corporation. The entity can make a profit, but all of its profits must be put back into the corporation; no members may take profits from the organization. Individuals can be paid a salary, wages or contract fees, but they may not take profits the entity earns.

 

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