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 Mississippi, a nonprofit business is typically organized as a non-profit corporation under the Mississippi 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 Mississippi 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, or similar purposes, including the prevention of cruelty to animals or children, and fostering amateur sports. To maintain this tax-exempt status, the organization must adhere to certain regulations, such as not engaging in political campaigning or substantial lobbying. Additionally, they must ensure that their earnings do not benefit any private shareholder or individual. Nonprofits that are social or recreational clubs may qualify for tax exemption under section 501(c)(7), provided they meet specific criteria, such as being organized for pleasure, recreation, and other nonprofitable purposes, and their income is mainly from their membership.