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Purpose of a Nonprofit Organization

One of the first steps in forming a nonprofit entity is to define the purpose of the entity. This statement of purpose, which must be made in writing, will define the type of tax exemption for which that organization is qualified. The following list provides examples of the types of tax-exempt nonprofit organizations:

  • Organizations formed for charitable purposes
  • Organizations that advocate for social welfare
  • Professional associations
  • Labor organizations
  • Chambers of commerce and business leagues
  • Social clubs
  • Homeowners associations
  • Employee benefit funds
  • Fraternal societies
  • Political organizations

The purpose driving a for-profit business is to benefit the owners of the business. By comparison, the activities of a nonprofit entity must be conducted for the benefit of the organization and not the owners. In order to qualify for tax exempt status, the organization must benefit the public.

Inside Purpose of a Nonprofit Organization