A nonprofit business is a business whose owners do not receive distributions of profits—and any money remaining after payment of the business’s expenses must be retained and used for its own expenses and for charitable purposes. Nonprofit businesses are often charitable foundations and exempt from federal income tax under Internal Revenue Code section 501(c)(3). A tax-exempt 501(c)(3) is a charitable organization that is formed for religious, charitable, educational, literary, artistic, or scientific purposes, or for preventing cruelty to animals and children, fostering amateur sports competition (locally and internationally), or testing for public safety. These charitable organizations are distinct from not-for-profit social or recreational clubs that may be exempt from federal income taxation if they meet the requirements of Internal Revenue Code section 501(c)(7).

In Alaska, a nonprofit business is typically organized under the Alaska Nonprofit Corporation Act. These entities are designed to operate without distributing profits to owners or shareholders. Instead, any surplus funds after expenses are reinvested into the organization's operations and charitable activities. Nonprofits in Alaska may include charitable foundations, and they can apply for federal income tax exemption under Section 501(c)(3) of the Internal Revenue Code if they serve religious, charitable, educational, scientific, or similar purposes. To maintain this tax-exempt status, they must adhere to specific regulations, such as avoiding political campaign involvement and ensuring their earnings do not benefit private individuals. Additionally, Alaska nonprofits must register with the Alaska Department of Commerce, Community, and Economic Development and comply with state regulations regarding annual reports and governance. Social or recreational clubs in Alaska may also be tax-exempt if they qualify under Section 501(c)(7) of the Internal Revenue Code, provided they are organized for pleasure, recreation, and other nonprofitable purposes and no part of the net earnings inures to the benefit of any private shareholder.