What is a Non Profit Organization? | Definition of a Non Profit Organization

A non profit organization is an enterprise that does not have owners and does not generate profit for any individuals. For the purposes of the IRS, a non profit organization may also be called a tax exempt organization. Otherwise, a non profit is often created very similarly to a business structure, but rather than being run by shareholders, it’s run by a non profit board.

A non profit organization is charitable in nature and frequently religious. Non profit organizations don’t need to pay taxes because they aren’t intended to (or allowed to) generate income. That does not mean that the directors or board members don’t make money, however; people who work for the non profit organization can be paid fair wages, they simply cannot be passed income from the non profit organization itself. To qualify as a non profit organization, a non profit needs to pass some rigorous standards held by the IRS. Since you will still need to pay employees, a Non-Profit must also still get a Tax ID / EIN Number and file taxes.

Written by Maurice Mallory