Question:

What is the difference between a 501(c)(3) and 501(c)(6) membership model?

Answer:

The main difference is that membership is more formal and members have voting rights in a 501(c)(6) as compared to a 501(c)(3).

Let’s dive into it! 501(c) is the designation for nonprofit organizations. (3) and (6) have membership organizations where (4) is primarily used for legislative lobbying type of activities.

501(c)(6)

501(c)(6) is commonly referred to as a business league. It’s a collection of a number of different businesses or individuals or associations. These businesses are in some common type of business vertical or some common type of interest/segment of a business. They are all tied together for some reason and pay membership dues to be a part of that league.

One thing to distinguish from the other 501(c)s is that any membership fees or anything that is contributed financially to the organization is not tax deductible as a charitable contribution. However, it can be a business write-off.

As for membership, it is built into the internal structure of the nonprofit organization. Members are given rights have usually have the power to vote on election of board members.

501(c)(3)

Membership for 501(c)(3)s are not built into the internal structure of the nonprofit organization. It’s more of an informal membership donation model. Therefore, anyone who wants to support the organization can pay dues as membership dues and get some small thing of value in return. Members do not have rights or have voting rights to elect board members. Different from a 501(c)(6), donations and contributions are going to tax deductible as a charitable contribution.

To Wrap Things Up….

The main and important difference between a 501(c)(3) and 501(c)(6) is that for a 501(c)(6), membership is official and formalized. The members have rights where they can vote members in and out and make decisions on behalf of the organization. Though at the same time, more rights can mean power and more power means more responsibilities. As for a 501(c)(3), members typically do not have rights and contribute membership dues in return for things of value. They may have some voting rights on specific things, but most of the times they do not.

As always, please feel free to reach out to our team at bertie@inbetterwetrust.com for any more questions you may have!