What is a not for profit business?
Despite the name, a not-for-profit business can make profits. It is how those profits are distributed that differentiates a nonprofit business from a for-profit business. While it can be difficult to obtain and maintain tax-exempt nonprofit status, the benefits can be substantial.Distribution of ProfitsWhile for-profit businesses distribute their profits for the private benefit of owners and shareholders, a nonprofit must retain excess funds to benefit the organization, pursue its goals and serve the public good. Reasonable employee salaries are allowed.Tax BenefitsA nonprofit corporation that meets requirements and obtains official tax-exempt status can be exempt from many state and federal taxes, although some taxes, such as employment taxes, still apply.State and Federal LevelsNonprofit corporations are first incorporated on the state level according to the state’s specific bylaws and requirements. The corporation can then apply for federal tax-exempt status through the Internal Rev
