A 501(c)(6) exempt organization is a nonprofit association of persons with a common business interest dedicated to the promotion of that common interest. Trade associations, business leagues, and chambers of commerce are three common types of tax-exempt organizations under Section 501(c)(6) of the Internal Revenue Code. Here are the seven distinguishing characteristics of a 501(c)(6) exempt organization:

1. The organization must be an association of persons having some common business interest and its purpose must be to promote this common business interest. To meet the requirements for tax exemption under 501(c)(6), an organization must possess the following characteristics.

2. The organization must be a membership-based organization and have a meaningful extent of membership support.

3. The organization cannot be organized for profit.

4. No part of the organization’s net earnings may inure to the benefit of any private shareholder or individual.

5. The organization’s activities are focused on the improvement of business conditions of one or more lines of business as distinguished from the performance of services for individual persons.

6. The organization does not perform services for individual persons as a principal activity.

7. The organization’s purpose is not to engage in a regular business of a kind ordinarily carried on for profit, even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining.

Contact us for assistance with your nonprofit formation, governance, and compliance questions. We can be reached at (804) 205-5162 or [email protected].

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