4 Types of Nonprofits You Could Start and Which One You Should

So you know you want to start a nonprofit, and you're chomping at the bit to get going. It's an exciting time, but before you start writing your nonprofit business plan, you'll first need to learn about the types of nonprofits you can start.

From public charities to trade organizations and everything in between, we've outlined the four major nonprofit types you can choose from.

4 Types of Nonprofits You Could Start (and Which One's Best for You)

Unlike a typical business, a nonprofit organization doesn't exist primarily to generate money for its owners, shareholders and employees.

Instead, its purpose can be to support a charitable cause, help people or animals, provide education, promote the teachings of a religion, advocate for legislative change or bring like-minded people together.

Suffice it to say, nonprofits come in all shapes and sizes, and their staggering variety can get confusing. Luckily, most nonprofits can be grouped into four distinct categories. Here, we'll discuss each one so you can decide which one best suits your goals.

1. Public Charities

If you've been wondering what the most common type of nonprofit is, public charities are the answer. As a type of 501(c)(3) organization, a public charity is probably what you picture when you think of a nonprofit.

According to the IRS, the kinds of organizations typically classified as public charities include:

• Schools, hospitals, churches, colleges, universities and medical research organizations
• Charities that have an active fundraising program and receive funding from many sources, including the general public
• Organizations that receive income from conducting activities that further their exempt purposes

If you choose to start a public charity, you'll be in good company. Well-known examples of public charities include:

• American Society for the Prevention of Cruelty to Animals
• Feeding America
• The American Red Cross

2. Social Advocacy Groups

As their name suggests, social advocacy groups focus primarily on advocating for certain social causes.

For tax purposes, social advocacy groups are usually classified as 501(c)(4) organizations, though they don't necessarily have to be.

These types of charities can focus on promoting a cause that benefits a certain group of people, or they can focus on promoting a cause that benefits as many people as possible, regardless of whether they belong to a particular group or not.

These famous social advocacy groups serve as prime examples:

• American Civil Liberties Union
• National Organization for Women
• Human Rights Watch

3. Private Foundations

While private foundations are similar to public charities in that they can be classified as 501(c)(3) organizations, they differ in the source of their funding.

Namely, instead of getting their money from a variety of sources, private foundations typically get funding from one major source.

Additionally, these types of foundations usually spend most of their time giving money to other charities or individuals rather than directly operating a charitable program such as a food bank or animal shelter.

Prominent examples of private foundations include:

• Ford Foundation
• Lilly Endowment Inc.
• The Coca-Cola Foundation

Trade and Professional Organizations

Finally, you could also start a nonprofit that promotes the collective interests of a group of people who engage in a particular kind of business. In other words, a trade organization, professional association or business league.

On paper, these charities are usually classified by the IRS as 501(c)(6) organizations.

Some of the largest trade and professional organizations in the U.S. include the:

• National Association of Realtors
• American Medical Association
• Institute of Electrical and Electronics Engineers

Which Nonprofit Is Right for You?

With so many types of nonprofits to start, which one is right for you? It all comes down to your main purpose for opening a nonprofit to begin with.

If you're not quite sure, use this chart to help you make the best decision for you:

Once you've determined which type makes the most sense for your needs, you'll be able to form your own nonprofit with confidence. Whether you want to take on a charitable cause, create a new trade association or advocate for legislative change, there's a nonprofit that's right for you.

Not sure where to start? Our comprehensive guide to nonprofits can tell you everything you need to know so you can start your journey toward making the world a better place.