So you have heard the term before, but do you really know what a nonprofit organization is? There are legal definitions, including 26 types of nonprofits recognized by the IRS, and there are common perceptions of what people mean when they refer to an organization as nonprofit. Let's start with perceptions.
For this site at About.com, a nonprofit is a tax-exempt organization that serves the public interest. In general, the purpose of this type of organization must be charitable, educational, scientific, religious or literary. This is a common and broad definition that fits the type of information likely to be found at this site. The public expects to be able to make donations to these organizations and deduct these donations from their federal taxes.
Legally, a nonprofit organization is one that does not declare a profit and instead utilizes all revenue available after normal operating expenses in service to the public interest. These organizations can be unincorporated or incorporated. An unincorporated nonprofit is somewhat rare for while it can be given federal tax-exempt status or the designation of being a 501(c)(3) organization as defined by the Internal Revenue Service, it does not enjoy the legal protection a corporation provides. When a nonprofit organization is incorporated, it shares many traits with for-profit corporations except that there are no shareholders.