1. 501(c)(3) — charitable, educational, scientific organisation

A nonprofit corporation formed under state law, then recognised by the IRS as exempt under IRC § 501(c)(3) (application: Form 1023, or Form 1023-EZ if you qualify). Most new organisations want to be classified as a public charity under § 509(a)(1) or § 509(a)(2), not a private foundation — the public-support test is what separates them, and failing it after five years is a real risk for an organisation funded by one donor.

What you get

• Donations are tax-deductible to the donor under § 170. This is the single biggest practical advantage and the reason most foundations can only fund c3s.
• Exempt from federal corporate income tax on related income; usually exempt from state income tax, and often from state sales and property tax (state by state, and property tax exemption is frequently the more valuable one).
• Eligible for foundation grants, most government grants, nonprofit pricing from vendors (Google, Microsoft, AWS credits), and USPS nonprofit postage rates.
• Credibility with institutional partners and universities.

What it costs you

• No private inurement, no private benefit. No owners, no equity, no shares. If the organisation dissolves, assets must go to another exempt organisation — you cannot get your capital back out. Founders are paid salaries, not returns, and compensation must be reasonable and documented (the intermediate-sanctions rules under § 4958 put excise taxes on the individual, not just the org).
• Absolute prohibition on political campaign intervention. Supporting or opposing a candidate can revoke exemption. No exceptions, no de minimis.
• Lobbying must be insubstantial. You can make a § 501(h) election to swap a vague “substantial part” test for a clear expenditure ceiling — generally worth doing if you plan any policy work at all.
• Radical transparency. Form 990 is public: budget, top salaries, largest contractors, board list, conflicts policy. Expect it to be read by journalists, funders and competitors.
• Governance you don’t control. An independent board with fiduciary duties can fire you. Many states set a minimum number of directors and restrict how many may be related or compensated (California’s 49% rule is the sharpest).
• Slow. Form 1023 approval can take months; 1023-EZ is faster but only for small orgs and attracts more downstream scrutiny.
• UBIT. Income from a regular trade or business unrelated to the exempt purpose is taxed, and too much of it threatens exemption.

Good fit when: the output is public knowledge, tools or services; funding will come from grants and donations; no investor is expecting a return.

2. 501(c)(6) — business league, trade association, professional body

Also a state nonprofit corporation, exempt under IRC § 501(c)(6) (application: Form 1024). The statutory purpose is to promote the common business interest of its members — an industry, a profession, a line of business — not to serve the general public and not to carry on a business for profit.

What you get

• Unlimited lobbying. This is the main reason c6s exist. You may lobby as much as you like in furtherance of member interests.
• Limited political activity is permitted, subject to the § 527(f) proxy tax and disclosure, and it cannot be the primary activity. A c6 may also sponsor a connected PAC.
• Membership dues, sponsorships, certification programmes, conferences and standards work all fit naturally.
• Members can generally deduct dues as an ordinary business expense under § 162 — but the portion attributable to lobbying is non-deductible and you must tell members what that percentage is (§ 6033(e)).
• Far less constrained on purpose than a c3, and no public-support test to pass.

What it costs you

• Donations are not deductible as charitable contributions. Individual donors get nothing. This removes most individual fundraising.
• Foundations generally cannot fund you without expenditure responsibility or an equivalency determination — in practice, grants dry up.
• Must serve a line of business as a whole, not particular members. Services that mainly benefit one company, or that look like a regular business, generate UBIT and can threaten exemption.
• Still files a public Form 990, still no owners, still an assets lock on dissolution.
• No state sales/property tax exemption in most states — those are usually charity-specific.

Good fit when: you convene an industry, set standards, certify practitioners, or need to lobby hard and continuously, and your money comes from organisations that get business value from membership.

3. For-profit company — LLC, C-corp, or benefit corporation

LLC. Cheapest and most flexible. Pass-through taxation by default; the operating agreement can allocate control and economics almost arbitrarily. Bad container for outside equity investment (VCs will not buy LLC units), and self-employment tax treatment is fiddly.

C-corporation. The default if anyone will ever invest. Delaware C-corp with common stock, a stock plan and vesting is the pattern every investor and every lawyer already knows. Double taxation is real but mostly theoretical for companies that reinvest; QSBS under § 1202 can exempt a large slice of founder gain on exit, and only C-corps qualify.

Benefit corporation / PBC. A C-corp variant available in most states (Delaware PBC is the common choice) that legally obliges directors to balance shareholder value against a stated public benefit, with a periodic benefit report. It is a governance signal and a takeover/mission defence, not a tax status — you pay ordinary corporate tax. Distinct from a B Corp, which is a private certification by B Lab and carries no legal force.

What you get

• Ownership. Equity, options, dilution, exit. You keep the upside.
• Speed. Incorporate in a day; no IRS application, no exemption to protect.
• Revenue from anything; no UBIT; no lobbying limit; political spending allowed.
• Financials are private.

What it costs you

• Pay tax. No deductible donations in, no foundation grants, no nonprofit pricing.
• Mission is only as durable as the cap table. PBC status helps; control does more.
• Some institutional and government customers, and most philanthropic funders, simply cannot contract with or fund a for-profit on the terms you want.

Good fit when: there is a product someone will pay for, you need capital, and you want to retain control of both the direction and the proceeds.