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 Nebraska, a nonprofit business is typically organized as a non-profit corporation under the Nebraska 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 held for future use. Nonprofits in Nebraska 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, charitable, educational, scientific, and other qualifying purposes. To maintain this tax-exempt status, they must adhere to specific operational guidelines, including restrictions on political activities and requirements to serve the public interest. Additionally, Nebraska nonprofits must comply with state regulations, such as registering with the Nebraska Secretary of State, and may be subject to state-level tax exemptions if they meet certain criteria. This is distinct from not-for-profit social or recreational clubs, which may qualify for tax exemption under section 501(c)(7) if they are organized for pleasure, recreational, or other non-profitable purposes and do not distribute earnings to members.