A nonprofit corporation derives its income from gifts, grants, fees, and a lease. The payment of a nonprofit organization cannot inure to the private benefit of any individual, director, or employee of the nonprofit. Salaries are not considered personal benefits because they are essential for the corporation's operation.
Nonprofit corporations (NPOs, or not-for-profit corporations) are tax-exempt and involve business income that the organization uses to achieve its tax-exempt purpose. For example, a nonprofit might apply for and receive a tax classification as a "501(c)(3)", indicating that the organization is tax-exempt and is organized and operated exclusively for charitable, religious, scientific, religious, literary, or educational purposes, or the prevention of cruelty to animals. Nonprofit organizations also may be tax-exempt for other reasons. Nonprofit corporations are exempt from federal corporate income tax and most state and local taxes if they do not conduct business solely for the benefit of the general public.
Many organizations qualify for nonprofit status under more than one term definition. For example, churches automatically allow nonprofits under US tax law. However, they may also be eligible under other definitions such as "organized and operated exclusively for religious purposes" or "engage in certain charitable, educational, or recreational endeavors."
