Nonprofits make money through a combination of several revenue sources that support their mission-driven operations while maintaining tax-exempt status. Key ways nonprofits generate income include:
- Donations and Fundraising: Individual donations are a primary source, especially for smaller nonprofits, often supplemented by fundraising events and campaigns. Donations from corporations also play a major role, with both individuals and corporations benefiting from tax deductions for their contributions
- Grants: Nonprofits apply for grants from private foundations, government agencies, and other organizations. These grants can be substantial and are often targeted to specific projects or operational costs
- Earned Income: Many nonprofits generate revenue by selling goods or services related to their mission. This includes merchandise sales (e.g., branded clothing), fees for services, membership dues, ticket sales for events, and renting out space. Income must generally be related to the nonprofit’s mission to maintain tax-exempt status, though unrelated business income can be taxed
- Membership and Subscription Models: Some nonprofits create membership programs where supporters pay regular fees in exchange for benefits, creating a sustainable recurring revenue stream
- Corporate Sponsorships and Partnerships: Nonprofits often partner with businesses that provide sponsorships or in-kind support in exchange for brand exposure, helping cover event or operating costs
- Investments and Endowments: Some nonprofits grow funds through investments or endowment funds, which provide long-term financial stability. Donations of stocks or other investments can also be a significant source of income
- Other Sources: Additional income can come from bequests, loans, program-related investments, and tax revenue in some cases
In summary, nonprofits mix donations, grants, earned income, memberships, sponsorships, and investments to fund their activities and ensure sustainability while adhering to legal and tax requirements
