A nonprofit organization (abbreviated NPO, also not-for-profit) is any organization that does not aim to make a profit, and which is not a public body.
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A nonprofit organization (abbreviated NPO, also not-for-profit) is any organization that does not aim to make a profit, and which is not a public body.
Non-profit distinction
Whereas for-profit corporations exist to earn and distribute taxable business earnings to shareholders, the nonprofit corporation exists solely to provide programs and services that are of public benefit. Often these programs and services are not otherwise provided by local, state, or federal entities. While they are able to earn a profit, more accurately called a surplus, such earnings must be retained by the organization for its future provision of programs and services. Earnings may not benefit individuals or stake-holders. Underlying many effective nonprofit endeavors is a commitment to management. Twenty years ago, the term "management" was distasteful to many of those involved in nonprofit organizations because of its connotations of "business." Non-profits prided themselves on being free of the taint of commercialism and undue consideration of the bottom line. Now a consensus has developed within the nonprofit sector that nonprofits need management as much as for-profit enterprises. The nonprofits are, of course still dedicated to "doing good." But they also realize that good intentions are no substitute for organization and leadership, for accountability, performance, and results. Those require management and that, in turn, begins with the organization's mission.
Nature and goals
NPOs are often charities or service organizations; they may be organized as a not-for-profit corporation or as a trust, a cooperative, or they may be purely informal.
Sometimes they are also called foundations, or endowments that have large stock funds. A very similar organization called the supporting organization operates like a foundation, but they are more complicated to administer, they are more tax favored, and the public charities that receive grants from them must have a specially determined relationship.
Foundations give out grants to other NPOs, or fellowships and direct grants to participants. However, the name foundations may be used by any not-for-profit corporation — even volunteer organizations or grass roots groups.
Applying Germanic or Nordic law (e.g., Germany, Sweden, Finland), NPOs typically are voluntary associations, although some have a corporate structure (e.g. housing cooperatives). Usually a voluntary association is founded upon the principle of one-person-one-vote.Fact: date=July 2007
Legal aspects
There is a wide diversity of structures and purposes in the NPO landscape. For legal classification and eventual scrutiny, there are, nevertheless, some structural elements of prime legal importance:
- Economic activity
- Supervision and management provisions
- Representation
- Accountability and Auditing provisions
- Provisions for the amendment of the statutes or articles of incorporation
- Provisions for the dissolution of the entity
- Tax status of corporate and private donors
- Tax status of the foundation
