Did you know that there are more than 1.5 million non-profit organizations in the United States? And that the non-profit sector contributes trillions of dollars to the U.S. economy?
It’s important not to confuse non-profit for non-valuable because these organizations do a massive amount of work in local communities and on the national scale.
Here are 5 of the 27 types of non-profit organizations that are doing important work near you.
1. 501(c)(3) – Charitable Organizations
The 501(c)(3) is the best known of the types of non-profit organizations because it covers charitable organizations. Not only are there over 1 million charities in the U.S., but these types of non-profits contribute 75% of the $3.67 trillion reported in revenue and expenses for the whole non-profit sector.
Within the 501(c)(3) there are five additional types of charities:
- Private foundations
While there are distinctions between these groups, all income for them remains tax-exempt.
2. 501(c)(6) – Trade or Professional Association
Are you a member of a chamber of commerce? A local business league? Or a union? Then you’re likely a member of one of the U.S.’s 63,000 501(c)(6) organizations.
Unlike charities funded by donations, 501(c)(6) receive the primary funding from member dues. They can also embark on political missions at the local, state, and federal levels to influence legislation related to its core purpose and the interest of its members. There’s no ceiling on what they can spend on lobbying. For reference, a 501(c)(3) can only spend $525,000, and those that spend more can lose their exemption.
3. 501(c)(8) – Fraternal Societies
Fraternal societies are membership-based organizations that provide financial benefits to members through insurance programs. You might recognize some of the more prominent names, such as the Knights of Columbus. However, fraternal societies can also include secret societies that don’t advertise their membership to the public.
4. 501(c)(15) – Mutual Insurance Companies of Association
Mutual insurance companies are stock-owned insurance companies that provide coverage to members at cost. These organizations usually operate at the county level, and they cover property insurance as well as funeral and burial insurance. To be a stock-owned insurance company must receive 50% of its revenue must come from member premiums. The threshold is lower (35%) to be a mutual insurance company.
5. 501(c)(7) – Social and Recreational Clubs
Did you know you can start a nonprofit to formalize your social club?
Formalizing your social club means you can collect member dues and hold fundraisers without paying federal income tax. It’s great news if your club is growing and you want to do things like buy or rent facilities or hire out services.
However, like all nonprofits, you need to follow strict recordkeeping requirements. Plus, income generated from unrelated purposes is taxed. For example, if a non-member leaves the proceeds of their investments to the club, you need to declare it and pay income tax.
There Are Still 22 Other Types of Non-Profit Organizations
When you think of nonprofit organizations, there’s a good chance you a 501(c)(3) charity pops into your head. But there are dozens of other types of non-profit organizations out there.
What binds all these organizations together is some form of tax-exempt income and the complicated IRS rules that come with it. But if you look closely, you’ll see there’s a type of nonprofit organization for almost every purpose.
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