Non-profit organization

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A non-profit organization (sometimes abbreviated to "not-for-profit," "non-profit" or "NPO") is an organization whose primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes. Non-profits may be involved in an innummerable range of areas relating to the arts, charities, education, politics, religion, research, or some other endeavour.

Although non-profits do not operate to generate profit, they still need to generate revenue in order to finance their activities. However, the extent to which non-profits may generate income may be constrained, or the use of such income may be restricted. Non-profits are therefore typically funded by donations from the private or public sector. Private donations may sometimes be tax deductible.

A charity is a type of non-profit organization, and some non-governmental organizations may also be non-profit organizations.

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Structure

Most non-profits do not have members, although they may. The non-profit may also be a trust or association of members. The organization may be controlled by its members who elect the Board of Directors or Board of Trustees. Not-for-profit organizations may have a delegate structure to allow for the representation of groups or corporations as members. Alternately, it may be a non-membership organization and the board of directors may elect its own successors.

Although the characteristic of not earning or "making" a profit is widely believed by the general public to be definitive, most experts today agree that it is actually legal and ethical restrictions on the distribution of profits to owners or shareholders that is the defining characteristic of nonprofits.

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Resource Capacity

Capacity support is a chronic issues faced by all non-profits that rely on external to maintain their operations. Often nonprofit capacity needs do not reflect donor prirorities. For a more complete discussion on this issue, references and resources see Capacity building

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Status

In most countries, non-profit organizations may apply for a tax exempt status; this means that financial donors may claim back any income taxes paid on money donated. A primary difference between a non-profit and a for-profit corporation is that a non-profit does not issue dividends, and may not enrich its directors. However, like for-profit corporations, non-profits may still have employees and can compensate their directors within reasonable bounds. Some critics of corporations argue that when they donate instead of paying taxes, the companies whitewash their reputations, sometimes paying even less than they would in taxes and benefitting in terms of marketing and public relations purposes. In some countries, e.g. in Europe, the idea of deductible donations is not endorsed as it is considered to violate the popular sovereignty. In a democracy, the people, i.e. the parliament, should be able to decide where the tax money goes. Donors indirectly decide on the use of their taxes which should be the privilege of parliament, not of individuals. In countries where donations are not tax-deductible, the state usually assumes a much larger role in supporting non-profit organizations.

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Goals

Such "organizations" 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 equity funds. Most foundations give out grants to other not-for-profit organizations, or fellowships to individuals. However, the name foundation may be used by any not-for-profit corporation -- even volunteer organizations or grass roots groups. A non-profit organization may be a very loosely organized group such as a block association, or a trade union, or it may be a complex structure such as a university, hospital, documentary film production company or educational book publisher.

In many countries applying Germanic or Nordic law (e.g. Germany,Sweden, Finland), it is typical that non-profit organizations are voluntary associations although there are some non-profit organizations with a corporate structure (e.g. housing corporations). A voluntary association is usually founded upon a principle of one man–-one vote. A large, nation-wide organization is usually organized as a league: the local level has a town- or county-level association with natural person membership, these associations being members of the national association. This is perceived to give the local level the maximal autonomy, while it also protects the organization from financial blunders of any single association. The organization of such league (e.g. trade union or a party) may be extremely complex. Often there are separate laws regulating usual, “idealist“ associations (anything from a sports club to trade union), political parties and religious denominations, restricting each type of organization to its chosen field.

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Laws

Most countries have laws governing the setting up, running, and reporting requirements of these organizations. Most larger organizations are required to publish their financial reports detailing their income and expenditure for the public. In many aspects they are similar to business entities though there are often significant differences. Both non-profit and for-profit entities must have board members, steering committee members, or trustees who owe the organization a fiduciary duty of loyalty and trust. A notable exception to this involves churches, which are often not required to disclose finances to anyone, not even its own members if the leadership choose.

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Examples

The largest non-profit organization in the United States is the Bill and Melinda Gates Foundation, which has an endowment of approximately $27 billion. The second-largest is the Howard Hughes Medical Institute, which has an endowment of approximately $11 billion. The largest organisation of this kind in the rest of the world is probably the British Wellcome Trust, though it is a "charity" in British usage, not a "non-profit". Note that this listing excludes universities, at least a few of which have assets in the tens of billions of dollars.

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Laws on non-profit organizations

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United Kingdom

In the United Kingdom non-profit organizations are rarely considered as a single class of entity. All philanthropic organizations have to be registered with the Charity Commission and they are referred to as charities, not as non-profits. Other groups which are classified as non-profit organizations in the U.S., such as trade unions, are subject to separate regulations, and are not conflated with charities in British usage.

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Examples of well known non-profit organizations

Some non-profits which are particularly well known, often for the charitable or social nature of their activities conducted over a long period of time, include the following organisations.

Many non-profit organizations use the .org top-level domain when selecting a domain name to differentiate themselves from more commercially-focussed entities which typically use the .com space.

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See also

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External links

Retrieved from "http://en.wikipedia.org/wiki/Non-profit_organization"
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