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 Idaho, a nonprofit business is typically organized as a non-profit corporation under the Idaho Nonprofit Corporation Act. These entities are designed to operate without the primary goal of making profits for owners or shareholders. Instead, any surplus funds after expenses are reinvested into the organization's mission or for charitable purposes. Nonprofits in Idaho may include charitable foundations, and they can apply for federal income tax exemption under Internal Revenue Code section 501(c)(3) if they serve religious, educational, charitable, scientific, literary, artistic purposes, or work towards preventing cruelty to children or animals, among other causes. To maintain this tax-exempt status, the organization must adhere to certain regulations, such as not distributing profits to members or engaging in political campaigning. Additionally, Idaho nonprofits must comply with state-specific regulations, including registration with the Idaho Secretary of State, annual reporting, and, if they solicit donations, compliance with the Idaho Charitable Solicitation Act. Social or recreational clubs in Idaho may also be tax-exempt if they meet the criteria of section 501(c)(7), which typically involves being organized for pleasure, recreational, or other non-profitable purposes and not conducting a substantial amount of business with the general public.