Identification

• A 501(c) corporation is one that has been granted nonprofit status by the Internal Revenue Service. This special designation creates an exemption from some federal taxes.
  
  

Types

• There are 28 different types of organizations described under section 501 of Title 26 of the U.S. Code. The most well known is the 501(c)(3) organization, which is entitled to receive tax deductible donations.
  
  

Features

• A 501(c) organization is one that is first incorporated as a normal business under state laws. It then must apply for and receive 501(c) status and submit tax returns every year (Form 990) in order to retain this designation.
  
  

Significance

• The most important aspect of a 501(c) corporation is that its business profits cannot accrue to its owners. Instead, all the profits must be reinvested in the business for the specific purposes described in its incorporating documents.
  
  

Function

• The other major aspect of a 501(c) corporation is that it undertakes activities of a public purpose. These functions range from charitable and religious causes to those that foster education, retirement funds and employee unions.