Non-profit status is primarily about your goals, not your revenue, hoever, earning too much profit (revenue>expenses) can endanger your nonprofit status. If yo

Non-profit status is primarily about your goals, not your revenue, hoever, earning too much profit (revenue>expenses) can endanger your nonprofit status. If you take in revenue, the revenue-generating activity must be strongly related to furthering your non-profit mission or it will be recharacterized as taxable business income ("UBIT") (but see the tax cases on museum gift shops for examples of how far you can stretch the definition of "related"). Too much UBIT can result in the loss of non-profit status. Any profits generated must be used toward the non-profits charitable purpose. Why do people register for non-profit status? - Donations are not treated as income - No taxes on revenue raised and spent on charitable activities (taxes on UBIT are same as for-profit rates) - Certain types of non-profits, i.e., 501(c)(3) non-profits can receive tax deductible donations (but donations to any other non-profits are not tax deductible) - Non-profit status is required for most private foundation and government grants for charitable activities. You are right about donations vs. investment. Non-profits must constantly raise money from a variety of sources in the form of grants or donations. To avoid "private foundation" status, that money must be raised from a variety of sources. (A private foundation is a type of non-profit with burdensome compliance requirements and restrictive related-party transaction rules.) A non-profit can charge for the services/products it provides, but generally must charge at- or below-cost rates. Also, salaries and compensation to employees is significantly more burdensome. You have all of the same compliance requirements as a normal for-profit company, but you must also justify the salaries and benefits paid to your officers or generally, any employee making more than $50,000. Finally, there are restrictions on what a non-profit can do. Money and property donated to a non-profit cannot be given to any of its employees, officers, or donors. It must be used/liquidated in furtherance of the non-profit's mission or given to another non-profit. Political activities can result in the loss of 501(c)(3) status (which means no tax-free donations, but the non-profit otherwise retains its non-profit status). Related party transactions can trigger loss of status, fines, penalties, and jailtime. However, if you want to make money and still do good, you can follow in the footsteps of Californian companies like Patagonia and register as a "B" corporation. (There are benefits to registering in California.) B corporations can spend money on charitable purposes without the risk of a shareholder lawsuit. Only a handful of other states offer B corporation status; Delaware is not one of them.