{"id":5579,"date":"2021-08-18T11:03:59","date_gmt":"2021-08-18T16:03:59","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/what-is-the-difference-between-501-c-and-501-c-3.html"},"modified":"2026-05-26T14:17:00","modified_gmt":"2026-05-26T19:17:00","slug":"what-is-the-difference-between-501-c-and-501-c-3","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/what-is-the-difference-between-501-c-and-501-c-3.html","title":{"rendered":"What Is the Difference Between 501(c) and 501(c)3?"},"content":{"rendered":"\n
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What Is the Difference Between 501(c) and 501(c)3?<\/h1>\n\n
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\n By Amber Sheppard, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last reviewed\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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501(c) and 501(c)(3) organizations are both tax-exempt nonprofit entities recognized by the IRS for charitable, religious, or educational purposes. The difference between a 501(c) and a 501(c)(3) organization is that donors to 501(c)(3) organizations may receive a tax deduction for their contributions.<\/p>\n\n <\/div>\n\n\n\n

Unlike for-profit<\/span> small businesses, 501(c)(3)\u00a0nonprofit organizations<\/span><\/a>\u00a0are exempt from paying federal income tax<\/span>. The Internal Revenue Service<\/span> (IRS<\/span>) treats each nonprofit organization<\/span> differently. Donors can claim a tax deduction<\/span> for what they give to a 501(c)(3) organization<\/span>. Some other 501(c) organizations do not get this benefit.<\/p>\n

This article explains the difference between IRS<\/span> designations of these charitable organizations<\/span>.<\/p>\n

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How Does a Small Business Become Exempt?<\/h2>\n

Organizing as a nonprofit<\/span><\/a> corporation<\/span> with your state does not automatically grant an entrepreneur\u2019s startup tax-exempt status<\/span>. To be a nonprofit entity, you must meet state criteria when you file your\u00a0articles of incorporation<\/a>\u00a0with the secretary of state.<\/p>\n

Your local\u00a0Small Business Administration Development Center<\/a>\u00a0(SBDC) has local resources to help you with your nonprofit<\/a> application process. The IRS<\/span> also has an\u00a0online workshop<\/a>\u00a0and\u00a0tax exemption application guide<\/a>.<\/p>\n

IRS<\/span> Nonprofit Application Process<\/h3>\n

The nonprofit\u2019s board of directors must apply to the IRS<\/span> for the\u00a0nonprofit business<\/a>\u00a0to become tax-exempt. The IRS<\/span> will not grant nonprofit organizations<\/span>\u00a0nonprofit status<\/span><\/a>\u00a0simply because they operate for a charitable purpose<\/span>. Each organization must apply to the IRS<\/span> and have an exempt purpose<\/span> under the Internal Revenue Code<\/span>.<\/p>\n

If the IRS<\/span> grants an organization nonprofit status<\/span> under Section 501(c) of the U.S. Tax Code<\/span>, it is not required to pay tax on\u00a0income related to its nonprofit purposes<\/a>. The organization is in the\u00a0searchable database<\/a>\u00a0the IRS<\/span> maintains on its website.<\/p>\n

What Is a 501(c) Organization?<\/h2>\n

A 501(c) organization is a nonprofit<\/a> recognized by the IRS<\/span>.<\/p>\n

Under this code, there are 29 different exempt entities<\/a>. Here are some 501(c) examples:<\/p>\n