A nonprofit is a tax-exempt organization that serves the public interest. In general, the purpose of this type of organization must be charitable, educational, scientific, religious or literary. The public expects to be able to make donations to nonprofit organizations and deduct the donations on their federal tax return.
Legally, a nonprofit organization is one that does not declare a profit and instead utilizes all revenue available after normal operating expenses in service to the public interest. In order to be given federal tax-exempt status or the designation of being a 501(c)(3), the organization must be incorporated.