A non-profit corporation is a special type of corporation that has been organized specific tax-exempt purposes. To qualify for non-profit status, your corporation must be formed to benefit (1) the public, (2) a specific group of individuals, or (3) the membership of the nonprofit. Examples of non-profits include religious organizations, charitable organizations, political organizations, credit unions and membership clubs (such as the Elk's Club or a country club).

Non-profit corporations enjoy the same limited liability protection that regular corporations and limited liability companies enjoy. In other words, your directors, trustees, members, and employees are not responsible for the debts and liabilities of the corporation. There are also significant federal and state tax benefits available for incorporating as a non-profit. But one of the most attractive benefits of having a non-profit is that you are allowed to receive grants from the federal government and private foundations.

It's important to note that simply forming a non-profit corporation does not automatically qualify you for federal and state tax exemption. Instead, it's only the first step. Only a validly organized non-profit corporation can take that second step and apply for federal and state tax exemption. This application is often referred to as the 501(c)(3) application, since that is the most common IRS code section applicable to non-profit organizations. In fact, there are more than 20 code sections where a non-profit can qualify, with the most important being 501(c)(7) for social and recreational clubs.

A non-profit corporation does NOT mean that the corporation cannot sell goods or services for money. In fact, many non-profits make money from selling everything from clothing to medical services. A non-profit can pay salaries to its officers and employees, but it cannot distribute any profits for the benefit of its directors, officers or members – for example, in the form of a dividend.