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 Georgia, a nonprofit business is typically structured as a corporation that is organized for a public or mutual benefit other than accumulating profits for owners or investors. Such organizations must adhere to the Georgia Nonprofit Corporation Code. Nonprofits in Georgia do not distribute profits to owners; any surplus funds after expenses are reinvested into the organization's operations or mission-driven activities. To gain exemption from federal income tax, Georgia nonprofits may seek recognition as 501(c)(3) organizations under the Internal Revenue Code if they are established for religious, charitable, educational, scientific, or other qualifying purposes. This tax-exempt status allows donors to claim contributions as tax deductions, subject to IRS regulations. It's important to note that 501(c)(3) organizations are distinct from social or recreational clubs, which may qualify for tax-exempt status under section 501(c)(7) if they meet certain criteria. Compliance with both state and federal regulations is essential for maintaining tax-exempt status and fulfilling the legal obligations of operating a nonprofit in Georgia.