Startups

5 Most Common Types of NPOs and Their Benefits

What do the various classifications of NPOs mean, and which is best for your nonprofit

  • 4 min Read
  • February 23, 2024

Author

Escalon

Table of Contents

A nonprofit organization (NPO) operates without profit motives. Enjoying tax-exempt status from the government, NPOs are not bound by income tax obligations. They can be incorporated as trusts, cooperatives, charities, environmental organizations, and religious organizations. While some NPOs have compensated management personnel, hiring volunteers is a standard mode of working. Unlike their for-profit counterparts, NPOs need proprietors, and any surplus revenue is invested right back towards advancing organizational objectives rather than being distributed among members or employees.

Here are 5 most common types of NPOs one must know about:

 

1. Charitable, Religious, or Educational Organizations


501(c)(3) status is granted to organizations that serve various noble purposes such as religious, charitable, scientific, literary, or educational endeavors. Think of schools, churches, and elderly care homes as prime examples of such organizations. They play vital roles in enriching communities, fostering learning, and promoting well-being on both local and global scales. So, whether it’s nurturing young minds, supporting vulnerable populations, or championing social causes, these organizations are at the forefront of positively impacting our world.

2. Community Social Welfare Organizations


501(c)(4) status is granted to organizations that promote social welfare without prioritizing profit. These entities prioritize community benefit over individual or corporate interests. Unlike 501(c)(3) nonprofits, 501(c)(4) organizations have the flexibility to participate in political activities and lobbying as long as these efforts align with their mission. Volunteer fire departments and civic associations make for great examples. Essentially, any organization plays a pivotal role in enhancing the well-being of communities, advocating for important issues, and fostering civic engagement. So, whether safeguarding neighborhoods or championing causes for the greater good, these organizations are instrumental in shaping a better future for all.

Talk to us about how Escalon’s essential business services can help your startup scale faster.

 

3. Business Leagues


501(c)(6) status encompasses various organizations such as business leagues, real estate boards, professional associations, chambers of commerce, and board-of-trade entities. These organizations qualify for this status by being funded through membership fees and income directly tied to their exempt purpose. They’re dynamic hubs that shape the core networking center for professionals, businesses, and trade entities to collaborate to facilitate collaboration, innovation, and growth. They play crucial roles in improving industry standards and promoting economic development. Whether supporting entrepreneurs, advocating for business interests, or driving regional prosperity, these organizations are pivotal in fostering the growth of thriving communities.

4. Agricultural, Horticultural, and Labor organizations


501(c)(5) organizations primarily focus on enhancing work conditions and efficiency in agricultural, horticultural, or labor settings involving animal or plant life cultivation, crop harvesting, or livestock raising. Their objectives include improving working conditions for laborers while striving for enhanced productivity and improved quality of agricultural products. On the other hand, 501(c)(16) entities specialize in providing financial support for many of the crop-related operations undertaken by their members or any other agricultural producers, such as farmers’ cooperative associations. This support may encompass financing various farming activities, including equipment procurement, livestock acquisition, soil management, and warehouse infrastructure development.

5. Insurance and services at a cost


501(c)(12) nonprofits, like local life insurance associations, offer services at minimal cost, with 85% income from members. It aids small insurance firms in rural areas, providing cost-based insurance and essential services like burial benefits. On the other hand, 501(c)(26) state-organized entities cater to high-risk individuals, offering them insurance or service arrangements. Lastly, 501(c)(29) under the Affordable Care Act assists nonprofit health insurance issuers through grants or loans, ensuring coverage for vulnerable populations. These designations prioritize community service, delivering insurance and resources affordably, and addressing diverse healthcare needs.

The final word


NPOs help make the society a better place. They help vulnerable populations live equitably and make the most of the civic infrastructure governments build. NPOs are here to serve one singular mission: to serve the greater good. In a world often driven by profit margins and bottom lines, NPOs are a glimmer of hope, fueled by dedication, to form the backbone of societal progress, touching lives and igniting change in ways that transcend monetary gains.

Schedule a call today

Want to know more? Escalon has helped over 5,000 companies across a range of industries improve their compliance regarding internal controls and streamline processes. Talk to an expert today.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

Managing Multi-State Compliance as Your Workforce Becomes More Distributed

Rapid expansion and remote work trends have empowered medium-sized businesses to hire talent nationwide. Yet with multi-state operations come multi-layered...

Read More
Leadership & Growth

How to Build Leadership Pipelines to Sustain Growth 

Growth often hinges on capable leadership at every level. Yet many medium-sized businesses focus on filling immediate management vacancies rather...

Read More
uncategorized

How to Avoid Operational Bottlenecks When Scaling Beyond $10M ARR 

Reaching $10 million in Annual Recurring Revenue (ARR) is a major milestone, but scaling further brings new operational hurdles. From...

Read More
Press Releases

Escalon Achieves SOC 2 Type II Compliance

April 30, 2025– Escalon Services, a leading provider of back-office solutions for startups and SMBs, proudly announces that it has...

Read More
People Management & HR

From 25 to 100 Employees: The HR Systems You Need to Stay Compliant

Moving from 25 employees to 100 is a tipping point for many businesses. What worked with a lean, close-knit team...

Read More
uncategorized

Compensation Strategies for Medium-Sized Businesses: How to Stay Competitive

Compensation isn’t just about paying people to show up and do work; it’s a strategic tool that can attract top...

Read More
Accounting & Finance

Common Accounting Mistakes That Cost Medium-Sized Businesses Millions 

Accurate accounting is the bedrock of any successful business operation. Yet, medium-sized businesses—those that have grown beyond the small-business stage...

Read More
Taxes

1099 vs. W-2: How to Ensure Compliance and Reduce Risk 

Distinguishing between independent contractors (1099) and employees (W-2) is a pivotal compliance matter for U.S. businesses. Misclassification can result in...

Read More
Accounting & Finance

Capital Raising in Spring: How to Position Your Startup for Investor Interest

Spring symbolizes renewal, making it an apt metaphor for startups aiming to secure fresh capital to fuel their next growth...

Read More