HOME
TheInfoList



A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. A wide array of organizations are nonprofit, including most political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities generally seek approval from governments to be
tax-exempt Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduc ...
, and some may also qualify to receive tax-deductible contributions, but an entity may
incorporate Incorporation may refer to: * Incorporation (business), the creation of a corporation * Incorporation of a place, creation of municipal corporation such as a city or county * Incorporation (academic), awarding a degree based on the student having a ...
as a nonprofit entity without securing tax-exempt status. The key aspects of nonprofits are accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Nonprofit organizations are accountable to the donors, founders, volunteers, program recipients, and the public community. For a nonprofit that seeks to finance its operations through donations, public confidence is a factor in the amount of money that a nonprofit organization is able to raise. The more nonprofits focus on their mission, the more public confidence they will have. This will result in more money for the organization. The activities a nonprofit is partaking in can help build the public's confidence in nonprofits, as well as how ethical the standards and practices are.


Statistics in the United States

According to the
National Center for Charitable Statistics The National Center for Charitable Statistics (NCCS) is a clearing house of data on the U.S. nonprofit sector. The National Center for Charitable Statistics builds national, state, and regional databases and develops standards for reporting on the ...
(NCCS), there are more than 1.5 million nonprofit organizations registered in the United States, including public charities,
private foundation A private foundation is a charitable organization that, while serving a good cause, might or might not qualify as a public charity by government standards. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over ...
s, and other nonprofit organizations. Private charitable contributions increased for the fourth consecutive year in 2017 (since 2014), at an estimated $410.02 billion. Out of these contributions, religious organizations received 30.9%, education organizations received 14.3%, and human services organizations received 12.1%. Between September 2010 and September 2014, approximately 25.3% of Americans over the age of 16 volunteered for a nonprofit.


Mechanism of money-raising

Nonprofits are not driven by generating profit, but they must bring in enough income to pursue their social goals. Nonprofits are able to raise money in different ways. This includes income from donations from individual donors or foundations; sponsorship from corporations; government funding; programs, services or merchandise sales; and investments. Each NPO is unique in which source of income works best for them. With an increase in NPO's within the last decade, organizations have adopted competitive advantages to create revenue for themselves to remain financially stable. Donations from private individuals or organizations can change each year and government grants have diminished. With changes in funding from year to year, many nonprofit organizations have been moving toward increasing the diversity of their funding sources. For example, many nonprofits that have relied on government grants have started fundraising efforts to appeal to individual donors.


Challenges

NPO's challenges primarily stem from lack of funding. Funding can either come from within the organization, fundraising, donations, or from the federal government. When cutbacks are made from the federal government, the organization suffers from devolution. This term describes when there is a shift of responsibility from a central government to a local, sub-national authority. The shift is due to the loss of funds; therefore, resulting in changes of responsibilities in running programs. Because of this frequent challenge, management should be innovative and effective in the pursuit of success.


Nonprofit vs. not-for-profit

Nonprofit and not-for-profit are terms that are used similarly, but do not mean the same thing. Both are organizations that do not make a profit, but may receive an income to sustain their missions. The income that nonprofit and not-for-profit organizations generate is used differently. Nonprofit organizations return any extra income to the organization. Not-for-profits use their excess money to pay their members who do work for them. Another difference between nonprofit organizations and not-for-profit organizations is their membership. Nonprofits have volunteers or employees who do not receive any money from the organization's fundraising efforts. They may earn a salary for their work that is independent from the money the organization has fundraised. Not-for-profit members have the opportunity to benefit from the organization's fundraising efforts. In the United States, both nonprofits and not-for-profits are tax-exempt under IRS publication 557. Although they are both tax-exempt, each organization faces different tax code requirements. A nonprofit is tax-exempt under
501(c)(3) A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit ...
requirements if it is either a religious, charitable, or educational based organization that does not influence state and federal legislation. Not-for-profits are tax-exempt under
501(c)(7) A 501(c) organization is a nonprofit organization in the federal law of the United States according to Internal Revenue Code and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 se ...
requirements if they are an organization for pleasure, recreation or another nonprofit purpose.Burgess, M. (26 October 2017) What is the difference between nonprofit & not for profit?. Retrieved from https://bizfluent.com/info-7991949-difference-between-nonprofit-not-profit.html Nonprofits are either member-serving or community-serving. Member-serving nonprofit organizations create a benefit for the members of their organization and can include but are not limited to credit unions, sports clubs, and advocacy groups. Community-serving nonprofit organizations focus on providing services to the community either globally or locally. Community-serving nonprofits include organizations that deliver aid and development programs, medical research, education, and health services. It is possible for a nonprofit to be both member-serving and community-serving.


Management

A common misconception about nonprofits is that they are run completely by volunteers. Most nonprofits have staff that work for the company, possibly using volunteers to perform the nonprofit's services under the direction of the paid staff. Nonprofits must be careful to balance the salaries paid to staff against the money paid to provide services to the nonprofit's beneficiaries. Organizations whose salary expenses are too high relative to their program expenses may face regulatory scrutiny. A second misconception is that nonprofit organizations may not make a profit. Although the goal of nonprofits isn't specifically to maximize profits, they still have to operate as a fiscally responsible business. They must manage their income (both grants and donations and income from services) and expenses so as to remain a fiscally viable entity. Nonprofits have the responsibility of focusing on being professional, financially responsible, replacing self-interest and
profit motive In economics, the profit motive is the motivation of firms that operate so as to maximize their profits. Mainstream microeconomic theory posits that the ultimate goal of a business is "to make money" - not in the sense of increasing the firm's stoc ...
with mission motive. Though nonprofits are managed differently from for-profit businesses, they have felt pressure to be more businesslike. To combat private and public business growth in the public service industry, nonprofits have modeled their business management and mission, shifting their raison d’être to establish sustainability and growth. Setting effective missions is a key for the successful management of nonprofit organizations. There are three important conditions for effective mission: opportunity, competence, and commitment. One way of managing the sustainability of nonprofit organizations is to establish strong relations with donor groups. This requires a donor marketing strategy, something many nonprofits lack.


Functions

NPOs have a wide diversity of structures and purposes. For legal classification, there are, nevertheless, some elements of importance: * Management provisions * Accountability and auditing provisions * Provisory for the amendment of the statutes or articles of incorporation * Provisions for the dissolution of the entity * Tax statuses of corporate and private donors * Tax status of the founders. Some of the above must be (in most jurisdictions in the
USA The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major self-governing territories, 326 India ...
at least) expressed in the organization's charter of establishment or constitution. Others may be provided by the supervising authority at each particular jurisdiction. While affiliations will not affect a legal status, they may be taken into consideration by legal proceedings as an indication of purpose. Most countries have laws that regulate the establishment and management of NPOs and that require compliance with
corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Governance structures and principles identify the distribution of rights and responsibilities among dif ...
regimes. Most larger organizations are required to publish their financial reports detailing their income and expenditure publicly. In many aspects, they are similar to corporate
business entities In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for the ...
though there are often significant differences. Both not-for-profit and for-profit corporate entities must have board members, steering-committee members, or trustees who owe the organization a
fiduciary duty 300px, The court of chancery, which governed fiduciary relations in England prior to the ''Judicature Acts'' A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typi ...
of loyalty and trust. A notable exception to this involves churches, which are often not required to disclose finances to anyone, including church members.


Formation and structure

In the
United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major self-governing territories, 326 India ...
, nonprofit organizations are formed by filing bylaws or
articles of incorporation Articles of incorporation, also referred to as the certificate of incorporation or the corporate charter, are a document or charter that establishes the existence of a corporation in the United States and Canada. They generally are filed with the S ...
or both in the state in which they expect to operate. The act of incorporation creates a legal entity enabling the organization to be treated as a distinct body (corporation) by law and to enter into business dealings, form contracts, and own property as individuals or for-profit corporations can. Nonprofits can have members, but many do not. The nonprofit may also be a
trust Trust may refer to: * Trust (social science), confidence in or dependence on a person or quality * Trust, North Carolina, a community in the United States Business and law * Trust law, a body of law under which one person holds property for the b ...
or
association Association may refer to: *Club (organization), an association of two or more people united by a common interest or goal *Trade association, an organization founded and funded by businesses that operate in a specific industry *Voluntary association ...
of members. The organization may be controlled by its members who elect the
board of directors A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organization, or a government agency. The powers, dut ...
,
board of governors A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organization, or a government agency. The powers, dut ...
or board of
trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any person who holds property, authority, or a position of trust or responsibility to transfe ...
s. A nonprofit may have a delegate structure to allow for the representation of groups or corporations as members. Alternatively, it may be a non-membership organization and the board of directors may elect its own successors. The two major types of nonprofit organization are membership and board-only. A membership organization elects the board and has regular meetings and the power to amend the bylaws. A board-only organization typically has a self-selected board and a membership whose powers are limited to those delegated to it by the board. A board-only organization's bylaws may even state that the organization does not have any membership, although the organization's literature may refer to its donors or service recipients as 'members'; examples of such organizations are
FairVote FairVote (formerly the Center for Voting and Democracy) is a 501(c)(3) organization that advocates electoral reform in the United States. Founded in 1992 as Citizens for Proportional Representation to support the implementation of proportional rep ...
and the
National Organization for the Reform of Marijuana Laws The National Organization for the Reform of Marijuana Laws (NORML ) is a non-profit organization based in Washington, D.C., that advocates for the reform of marijuana laws in the United States regarding both medical and non-medical use. According t ...
. The
Model Nonprofit Corporation ActThe Model Nonprofit Corporation Act (MNCA) is a model act prepared by thNonprofit Organizations Committeeof the Business Law Section of the American Bar Association. The MNCA is a model set of statutes governing nonprofit corporations proposed for ad ...
imposes many complexities and requirements on membership decision-making. Accordingly, many organizations, such as the
Wikimedia Foundation The Wikimedia Foundation, Inc. (WMF, or simply Wikimedia) is an American non-profit and charitable organization headquartered in San Francisco, California. The foundation supports and participates in the Wikimedia movement, owning the internet ...
, have formed board-only structures. The
National Association of Parliamentarians The National Association of Parliamentarians (NAP) is, despite its name, an organization with international membership that is the largest non-profit association of parliamentarians in the world. NAP is dedicated to the study, promotion, and use of ...
has generated concerns about the implications of this trend for the future of openness, accountability, and understanding of public concerns in nonprofit organizations. Specifically, they note that nonprofit organizations, unlike business corporations, are not subject to
market discipline{{Multiple issues, {{expert-subject, Economics, date=January 2010 {{essay-like, date=September 2008 {{no footnotes, date=September 2008 Buyers and sellers in a market are said to be constrained by market discipline in setting prices because they have s ...
for products and shareholder discipline of their capital; therefore, without membership control of major decisions such as the election of the board, there are few inherent safeguards against abuse. A rebuttal to this might be that as nonprofit organizations grow and seek larger donations, the degree of scrutiny increases, including expectations of audited financial statements. A further rebuttal might be that NPOs are constrained, by their choice of legal structure, from financial benefit as far as distribution of profit to members and directors is concerned.


Tax exemption

In many countries, nonprofits may apply for
tax-exempt Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduc ...
status, so that the organization itself may be exempt from income tax and other taxes. In the United States, to be exempt from federal income taxes, the organization must meet the requirements set forth in the
Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 o ...

Internal Revenue Code
. Granting nonprofit status is done by the state, while granting tax-exempt designation (such as 501(c)(3)) is granted by the federal government via the IRS. This means that not all nonprofits are eligible to be tax-exempt. NPOs use the model of a
double bottom lineDouble bottom line (abbreviated as DBL or 2BL) seeks to extend the conventional bottom line, which measures fiscal performance—financial profit or loss—by adding a ''second'' bottom line to measure a for-profit business's performance in t ...
in that furthering their cause is more important than making a profit, though both are needed to ensure the organization's sustainability.


By jurisdiction


Australia

In
Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. It is the largest country in Oceania and the world's sixt ...

Australia
, nonprofit organizations include trade unions, charitable entities, co-operatives, universities and hospitals, mutual societies, grass-root and support groups, political parties, religious groups, incorporated associations, not-for-profit companies,
trusts A trust is a legal relationship in which the legal title to property is entrusted to a person or legal entity with a fiduciary duty to hold and use it for another's benefit. In the Anglo-American common law, the party who entrusts the property i ...
and more. Furthermore, they operate across a multitude of domains and industries, from health, employment, disability and other human services to local sporting clubs, credit unions, and research institutes. A nonprofit organization in Australia can choose from a number of legal forms depending on the needs and activities of the organization: co-operative, company limited by guarantee, unincorporated association, incorporated association (by the Associations Incorporation Act 1985) or incorporated association or council (by the Commonwealth Aboriginal Councils and Associations Act 1976). From an academic perspective,
social enterprise A social enterprise is an organization that applies commercial strategies to make a positive difference for social benefit. The social impact is funded wholly or partly by reinvesting profits made by the organization to create social capital. Profit ...
is, for the most part, considered a sub-set of the nonprofit sector as typically they too are concerned with a purpose relating to a public good. However, these are not bound to adhere to a nonprofit legal structure, and many incorporate and operate as for-profit entities. In Australia, nonprofit organizations are primarily established in one of three ways: companies limited by guarantee, trusts, and incorporated associations. However, the incorporated association form is typically used by organizations intending to operate only within one Australian state jurisdiction. Nonprofit organizations seeking to establish a presence across
Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. It is the largest country in Oceania and the world's sixt ...

Australia
typically consider incorporating as a company or as a trust.


Belgium

By Belgian law, there are several kinds of nonprofit organization: * Non-profit membership associations'', called '' Vereniging zonder winstoogmerk'' (abbreviated ''vzw'') in
Dutch Dutch commonly refers to: * Something of, from, or related to the Netherlands * Dutch people () * Dutch language () *Dutch language , spoken in Belgium (also referred as ''flemish'') Dutch may also refer to:" Castle * Dutch Castle Places * D ...
), or ''Association sans but lucratif'' (abbreviated ''asbl'') in
French French (french: français(e), link=no) may refer to: * Something of, from, or related to France ** French language, a French language which originated in France, and its various dialects ** French people, a nation and ethnic group identified with Fr ...
, or ''Vereinigung ohne Gewinnerzielungsabsicht'' in
German German(s) may refer to: Common uses * of or related to Germany * Germans, Germanic ethnic group, citizens of Germany or people of German ancestry * For citizens of Germany, see also German nationality law * German language * Germanic peoples * Ger ...
* '' Internationale vereniging zonder winstoogmerk'' (Dutch, often abbreviated ''
ivzw Laws regulating nonprofit organizations, nonprofit corporations, non-governmental organizations, and voluntary associations vary in different jurisdictions. Australia In Australia, nonprofit organizations include trade unions, charitable entities, ...
'') or '' Association internationale sans but lucratif'' (French, often abbreviated ''
aisbl Laws regulating nonprofit organizations, nonprofit corporations, non-governmental organizations, and voluntary associations vary in different jurisdictions. Australia In Australia, nonprofit organizations include trade unions, charitable entities, ...
'') for international nonprofit organizations. * ''Stichting van openbaar nut'' (Dutch, abbreviated ''son'') or ''Fondation d’utilités publique'' (French, abbreviated ''fup''); a non-membership organization for the common good. These three kinds of nonprofit organizations contrast to a fourth: * ''Feitelijke vereniging'' (Dutch) or ''Association de fait'' (French), an informal organization, often started for a short-term project, or managed alongside another NPO that does not have any status in law so cannot purchase property etc. (association sans personnalité morale).


Canada

Canada Canada is a country in the northern part of North America. Its ten provinces and three territories extend from the Atlantic to the Pacific and northward into the Arctic Ocean, covering , making it the world's second-largest country by total ...

Canada
allows nonprofit organizations to be incorporated or unincorporated. They may incorporate either federally, under Part II of the
Canada Business Corporations Act The ''Canada Business Corporations Act'' (CBCA; french: Loi canadienne sur les sociétés par actions) is an act of the Parliament of Canada regulating Canadian business corporations. Corporations in Canada may be incorporated federally, under the ...
, or under provincial legislation. Many of the governing Acts for Canadian nonprofits date to the early 1900s, meaning that nonprofit legislation has not kept pace with legislation that governs for-profit corporations, particularly with regards to
corporate governance Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Governance structures and principles identify the distribution of rights and responsibilities among dif ...
. Federal, and in some provinces (including
Ontario , Label_map = yes , image_map = Ontario in Canada 2.svg , map_alt = Map showing Ontario's location east/central of Canada. , coordinates = , capital = Toronto , largest_city ...
), incorporation is by way of
Letters Patent upLetters patent transferring a predecessor of the Nancy in 1768">Nancy, France">Nancy in 1768 Letters patent ( la, litterae patentes) (always in the plural) are a type of legal instrument in the form of a published written order issued by a mon ...
, and any change to the Letters Patent (even a simple name change) requires formal approval by the appropriate government, as do bylaw changes. Other provinces (including
Alberta ("Strong and free") , image_map = Alberta in Canada 2.svg , Label_map = yes , coordinates = , official_lang = English , capital = Edmonton , largest_city = Calgary , l ...
) permit incorporation ''as of right'', by the filing of Articles of Incorporation or Articles of Association. During 2009, the federal government enacted new legislation repealing the Canada Corporations Act, Part II – the ''Canada Not-for-Profit Corporations Act''. This Act was last amended on 10 October 2011, and the act was current until 4 March 2013. It allows for incorporation ''as of right'', by Articles of Incorporation; does away with the ''
ultra vires ''Ultra vires'' (Latin: "beyond the powers") is a Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ''intra vires'' ("within the powers"). Acts ...
'' doctrine for nonprofits; establishes them as legal persons; and substantially updates the governance provisions for nonprofits. Ontario also overhauled its legislation, adopting the ''Ontario Not-for-Profit Corporations Act'' during 2010; the new Act is expected to be in effect as of 1 July 2013. Canada also permits a variety of charities (including public and private foundations). Charitable status is granted by the
Canada Revenue Agency The Canada Revenue Agency (CRA; ) is the revenue service of the Government of Canada. The CRA collects taxes, administers tax law and policy, and delivers benefit programs and tax credits for the federal government and most provincial and territoria ...
(CRA) upon application by a nonprofit; charities are allowed to issue income tax receipts to donors, must spend a certain percentage of their assets (including cash, investments, and fixed assets) and file annual reports in order to maintain their charitable status. In determining whether an organization can become a charity, CRA applies a
common law#REDIRECT common law#REDIRECT common law {{Redirect category shell, 1= {{R from other capitalisation ...
{{Redirect category shell, 1= {{R from other capitalisation ...
test to its stated objects and activities. These must be: * The relief of poverty * The advancement of education * The advancement of religion, or * Certain other purposes that benefit the community in a way the courts have said is charitable Charities are not permitted to engage in partisan political activity; doing so may result in the revocation of charitable status. However, a charity can carry out a small number of political activities that are non-partisan, help further the charities' purposes, and subordinate to the charity's charitable purposes.


France

In
France France (), officially the French Republic (french: link=no, République française), is a country primarily located in Western Europe, consisting of metropolitan France and several overseas regions and territories. The metropolitan area of Fr ...
, nonprofits are called ''associations''. They are based on a law enacted 1 July 1901. As a consequence, the nonprofits are also called ''association loi 1901''. A nonprofit can be created by two people to accomplish a common goal. The ''association'' can have industrial or commercial activities or both, but the members cannot make any profit from the activities. Thereby, worker's unions and political parties can be organized from this law. In 2008, the
National Institute of Statistics and Economic Studies National may refer to: Common uses * Nation or country ** Nationality – a ''national'' is a person who is subject to a nation, regardless of whether the person has full rights as a citizen ** National (distribution), a type of product or publi ...
(INSEE) counted more than a million of these ''associations'' in the country, and about 16 million people older than 16 are members of a nonprofit in France (a third of the population over 16 years old). The nonprofits employ 1.6 million people, and 8 million are volunteers for them. This law is also relevant in many
former French colonies A former is an object, such as a template, gauge or cutting die, which is used to form something such as a boat's hull. Typically, a former gives shape to a structure that may have complex curvature. A former may also become an integral part of t ...
, particularly in
Africa Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 6% of Earth's total surface area and 20% of it ...

Africa
.


Hong Kong

The
Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and special administrative region of the People's Republic of China on the eastern Pearl River Delta o ...
Company Registry provides a memorandum of procedure for applying to Registrar of Companies for a Licence under Section 21 of the Companies Ordinance (Cap.32) for a limited company for the purpose of promoting commerce, art, science, religion, charity, or any other useful object.


India

In
India India (Hindi: ), officially the Republic of India (Hindi: ), is a country in South Asia. It is the second-most populous country, the seventh-largest country by land area, and the most populous democracy in the world. Bounded by the Indian Oce ...

India
,
non-governmental organizations upright=1.3, alt=A roomful of people, Europe-Georgia Institute head George Melashvili addresses the audience at the launch of the "Europe in a suitcase" project by two NGOs (the EGI and the Friedrich Naumann Foundation), which aims to increase ...
are the most common type of societal institutions that do not have commercial interests. However, they are not the only category of non-commercial organizations that can gain official recognition. For example, memorial trusts, which honor renowned individuals through social work, may not be considered as NGOs. They can be registered in four ways: * Trust * Society * Section-25 company (Section 8 as per the new Companies Act, 2013) * Special licensing Registration can be with either the Registrar of Companies (RoC) or the Registrar of Societies (RoS). The following laws or Constitutional Articles of the Republic of India are relevant to the NGOs: * Articles 19(1)(c) and 30 of the Constitution of India * Income Tax Act, 1961 * Public Trusts Acts of various states * Societies Registration Act, 1860 * Section 25 of the Indian Companies Act, 1956 (Section 8 as per the new Companies Act, 2013) * Foreign Contribution (Regulation) Act, 1976.


Republic of Ireland

The Irish Nonprofits Database was created by Irish Nonprofits Knowledge Exchange (INKEx) to act as a repository for regulatory and voluntarily disclosed information about Irish public-benefit nonprofits. The database lists more than 10,000 nonprofit organizations in
Ireland Ireland (; ga, Éire ; Ulster-Scots: ) is an island in the North Atlantic. It is separated from Great Britain to its east by the North Channel, the Irish Sea, and St George's Channel. Ireland is the second-largest island of the British Isles, ...

Ireland
. In 2012 INKEx ceased to operate due to lack of funding.


Israel

In
Israel Israel (; he, יִשְׂרָאֵל; ar, إِسْرَائِيل), officially known as the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, '), is a country in Western Asia, located on the southeastern shore of the Mediterranean Se ...
nonprofit organizations (NPOs) and non-governmental organizations (NGOs) are usually established as registered nonprofit associations (Hebrew ''amutah,'' plural ''amutot'') or public benefit companies (Hebrew ''Chevrah LeTo’elet Hatzibur,'' not to be confused with
public benefit corporation Public-benefit corporation is a term that has different meanings in different jurisdictions. In some cases it is the technical term used for a traditional nonprofit charity or religious organization. In other locations it is the term used for a new ...
s). The structure of
financial statements Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to und ...
of nonprofit organizations is regulated Israel's Accounting Standard No. 5, and must include a
balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business p ...
, a report on activities, the income and expenditure for the particular period, a report on changes in assets, a statement of
cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected to ...
s, and notes to the financial statements. A report showing the level of restriction imposed on the assets and liabilities can be given, though this is not required. ''Amutot'' are regulated by the Associations Law, 1980. An ''amutah'' is a body corporate, though not a company. The ''amutah'' is successor to the which predated the State of Israel, and was established by the now-superseded 1909 Ottoman Law on Associations, based on the French law of 1901. Public benefit companies are governed solely by company law; if their regulations and objectives meet the two conditions specified in Section 345A of the Companies Act, they will in effect be ''amutot'' in all but name. An ''amutah'' must register with the ''Rasham Ha’amutot'' ('Registrar of Amutot'); a public benefit company must register with the ''Rasham HaChavarot'' egistrar of Companies Both are under the purview of the ''Rashot Hata’agidim'' ('Corporations Authority') of the
Ministry of JusticeA Ministry of Justice is a common type of government department that serves as a justice ministry. Lists of current ministries of justice Named "Ministry" * Ministry of Justice (Abkhazia) * Ministry of Justice (Afghanistan) * Ministry of Justice ...
.


Japan

In
Japan , image_flag = Flag of Japan.svg , alt_flag = Centered deep red circle on a white rectangle , image_coat = Imperial Seal of Japan.svg , alt_coat = Golden circle subdivided ...
, an NPO is any citizen's group that serves the public interest and does not produce a profit for its members. NPOs are given corporate status to assist them in conducting business transactions. As at February 2011, there were 41,600 NPOs in Japan. Two hundred NPOs were given tax-deductible status by the government, which meant that only contributions to those organizations were tax deductible for the contributors.


New Zealand

In
New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and more than 700 smaller islands, covering a total area of . New Zealand ...
, nonprofit organizations usually are established as incorporated societies or
charitable trust A charitable trust is an irrevocable trust established for charitable purposes and, in some jurisdictions, a more specific term than "charitable organization". A charitable trust enjoys a varying degree of tax benefits in most countries. It also gen ...
s. An incorporated society requires a membership of at least 15people.


Russia

Russian law contains many legal forms of non-commercial organization (NCO), resulting in a complex, often contradictory, and limiting regulatory framework. The primary requirements are that NCOs, whatever their type, do not have the generation of profit as their main objective and do not distribute any such profit among their participants (Article 50(1), Civil Code). Most commonly there are five forms of NCO: *Public associations – A public association is the form most comparable to an 'association' as used in international parlance. A public association is a membership-based organization of individuals who associate on the basis of common interests and goals stipulated in the organization's charter. *
Foundation Foundation may refer to: Arts, entertainment, and media Games * ''Foundation'', an Amiga video game * ''Foundation'', a 2019 simulation video game by Polymorph Games Literature * ''Foundation'' (b-boy book), by Joseph G. Schloss * ''Foundation'' ...
s – Foundations are property-based, non-membership organizations created by individuals or legal persons (or both) to pursue social, charitable, cultural, educational, or other public benefit goals. *
Institution Institutions, according to Samuel P. Huntington, are "stable, valued, recurring patterns of behavior". Institutions can refer to mechanisms which govern the behavior of a set of individuals within a given community, and are identified with a soc ...
s – The institution (uchrezhdeniye) is a form that exists in Russia and several other countries of the former Soviet Union. Like foundations, institutions do not have members. Unlike foundations, however, institutions do not acquire property rights in the property conveyed to them (Article 120, Civil Code, and Article 20, NCO Law). Moreover, the founders are liable for any obligations of the institution that it cannot meet on its own. *Non-commercial partnerships – A non-commercial partnership (NP) (Article 8, NCO Law) is a membership organization pursuing activities for the mutual benefit of members. Therefore, assets that have been transferred to an NP as donations can be used for purposes other than those having public benefit. *Autonomous non-commercial organizations – An autonomous non-commercial organization (ANO) (Article 10, NCO Law) is a non-membership organization undertaking services in the field of education, social policy, culture, etc., which in practice often generates income by providing its services for a fee.


South Africa

In
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. With over 59 million people, it is the world's 23rd-most populous nation and covers an area of . South Africa has three capital cities: e ...
, certain types of charity may issue a tax certificate when requested, which donors can use to apply for a tax deduction. Charities/NGOs may be established as voluntary associations, trusts or nonprofit companies (NPCs). Voluntary associations are established by agreement under the common law, and trusts are registered by the Master of the High Court. Nonprofit companies (NPCs) are registered by the
Companies and Intellectual Property Commission The Companies and Intellectual Property Commission (CIPC) is an agency of the Department of Trade and Industry in South Africa. The CIPC was established by the Companies Act, 2008 (Act No. 71 of 2008) as a juristic person to function as an organ of ...
. All of these may voluntarily register with The Directorate for Nonprofit Organisations and may apply for tax-exempt status to the
South African Revenue Service The South African Revenue Service (SARS) is the revenue service (tax-collecting agency) of the South African government. It was established by legislation to collect revenue and ensure compliance with tax law. Its vision is to be an innovative ...
(SARS).


Ukraine

In
Ukraine Ukraine ( uk, Україна, Ukraina, ) is a country in Eastern Europe. It is the second-largest country in Europe, after Russia, which it borders to the east and north-east; it also shares borders with Belarus to the north; Poland, Slovakia a ...
, nonprofit organizations include non-governmental organizations, cooperatives (inc.
housing cooperative 325px, 999 N. Lake Shore Drive, a co-op owned residential building in Chicago, Illinois ">Illinois.html" style="text-decoration: none;"class="mw-redirect" title="Chicago, Illinois">Chicago, Illinois A housing cooperative or a housing co-op, ...
s), charitable organizations,
religious organization Religious activities generally need some infrastructure to be conducted. For this reason, there generally exist religion-supporting organizations, which are some form of organization that manage: * the upkeep of places of worship, such as mo ...
s, political parties,
commodities exchanges A commodities exchange is an exchange, or market, where various commodities are traded. Most commodity markets around the world trade in agricultural products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk ...
(in Ukraine, commodities exchanges can't be organized for profit) and more. Nonprofit organizations obtain their non-profit status from tax authorities. The state fiscal service is the main registration authority for nonprofit status.


United Kingdom

In the UK a nonprofit organization may take the form of an
unincorporated association Under English law, an unincorporated association is a group of people who come together # for a common purpose (unless the purpose is profit) # intending to create a legally binding relationship between themselves. The range of possible unincorpora ...
, a
charitable trust A charitable trust is an irrevocable trust established for charitable purposes and, in some jurisdictions, a more specific term than "charitable organization". A charitable trust enjoys a varying degree of tax benefits in most countries. It also gen ...
, a
charitable incorporated organisation A Charitable Incorporated Organisation (CIO) is a corporate form of business designed for (and only available to) charitable organisations in the United Kingdom. CIO status is conferred by the Charity Commission on application by a charity, wheth ...
(CIO), a
company limited by guarantee In British, Irish and Australian company law, a company limited by guarantee (CLG) is a type of corporation used primarily (but not exclusively) for non-profit organisations that require legal personality. A company limited by guarantee does not us ...
(which may or may not be charitable), a charter organization (which may or may not be charitable), a
charitable company A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious or other activities serving the public interest or common good). The legal definition of a chari ...
, a
community interest company A community interest company (CIC) is a type of company introduced by the United Kingdom government in 2005 under the Companies (Audit, Investigations and Community Enterprise) Act 2004, designed for social enterprises that want to use their prof ...
(CIC) (which may or may not be charitable), a community benefit society (which may or may not be charitable), or a
cooperative society A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise".Charitable Organisation A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious or other activities serving the public interest or common good). The legal definition of a chari ...
) or not, and may be required to be registered or not.


United States

After a nonprofit organization has been formed at the state level, the organization may seek recognition of
tax-exempt Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduc ...
status with respect to U.S. federal income tax. That is done typically by applying to the
Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service of the United States federal government responsible for collecting taxes and administering the Internal Revenue Code, the main body of federal statutory tax law. It is part of the Depa ...
(IRS), although statutory exemptions exist for limited types of nonprofit organization. The IRS, after reviewing the application to ensure the organization meets the conditions to be recognized as a tax-exempt organization (such as the purpose, limitations on spending, and internal safeguards for a charity), may issue an authorization letter to the nonprofit granting it tax-exempt status for income-tax payment, filing, and deductibility purposes. The exemption does not apply to other federal taxes such as employment taxes. Additionally, a tax-exempt organization must pay federal tax on income that is unrelated to their exempt purpose. Failure to maintain operations in conformity to the laws may result in the loss of tax-exempt status. Individual states and localities offer nonprofits exemptions from other taxes such as
sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a govern ...
or
property tax A property tax or millage rate is an ad valorem tax on the value of a property. In the OECD classification scheme, this includes households recurrent taxes on immovable property and net-wealth, taxes on estate, inheritance and gifts, and taxes ...
. Federal tax-exempt status does not guarantee exemption from state and local taxes and vice versa. These exemptions generally have separate applications, and their requirements may differ from the IRS requirements. Furthermore, even a tax-exempt organization may be required to file annual financial reports (
IRS Form 990 Form 990 (officially, the "Return of Organization Exempt From Income Tax") is a United States Internal Revenue Service form that provides the public with financial information about a nonprofit organization. It is often the only source of such info ...
) at the state and federal levels. A tax-exempt organization's 990 forms are required to be available for public scrutiny.


Governance

The board of directors has ultimate control over the organization, but typically an
executive director An executive director is a member of a board of directors for an organisation, but the meaning of the term varies between countries. United States In the US, an executive director is a chief executive officer (CEO) or managing director of an o ...
is hired. In some cases, the board is elected by a membership, but commonly, the board of directors is self-perpetuating. In these '
board-only A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that oper ...
' organizations, board members nominate new members and vote on their fellow directors' nominations. Part VI Governance, Management, and Disclosure, section A, question 7a of the Form 990 asks 'Did the organization have members, stockholders, or other persons who had the power to elect or appoint one or more members of the governing body?'; the IRS instructions added '(other than the organization's governing body itself, acting in such capacity)'.


Problems


Founder's syndrome

Founder's syndrome Founder's syndrome (also founderitis) is the difficulty faced by organizations, and in particular young companies such as start-ups, where one or more founders maintain disproportionate power and influence following the effective initial establish ...
is an issue organizations experience as they expand. Dynamic founders, who have a strong vision of how to operate the project, try to retain control of the organization, even as new employees or volunteers want to expand the project's scope or change policy.


Resource mismanagement

Resource mismanagement is a particular problem with NPOs because the employees are not accountable to anyone who has a direct stake in the organization. For example, an employee may start a new program without disclosing its complete liabilities. The employee may be rewarded for improving the NPO's reputation, making other employees happy, and attracting new donors. Liabilities promised on the full faith and credit of the organization but not recorded anywhere constitute
accounting fraud Accounting scandals are business scandals which arise from intentional manipulation of financial statements with the disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex meth ...
. But even indirect liabilities negatively affect the financial sustainability of the NPO, and the NPO will have financial problems unless strict controls are instated. Some commenters have argued that the receipt of significant funding from large for-profit corporations can ultimately alter the NPO's functions. A frequent measure of an NPO's efficiency is its
expense ratioThe expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising (12b-1), and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund's total assets w ...
(i.e. expenditures on things other than its programs, divided by its total expenditures).


Competition for talent

Competition for employees with the public and private sector is another problem that nonprofit organizations inevitably face, particularly for management positions. There are reports of major talent shortages in the nonprofit sector today regarding newly graduated workers, and NPOs have for too long relegated hiring to a secondary priority, which could be why they find themselves in the position many do. While many established NPOs are well-funded and comparative to their public sector competitors, many more are independent and must be creative with which incentives they use to attract and maintain vibrant personalities. The initial interest for many is the remuneration package, though many who have been questioned after leaving an NPO have reported that it was stressful work environments and implacable work that drove them away. Public- and private-sector employment have, for the most part, been able to offer more to their employees than most nonprofit agencies throughout history. Either in the form of higher wages, more comprehensive benefit packages, or less tedious work, the public and private sectors have enjoyed an advantage over NPOs in attracting employees. Traditionally, the NPO has attracted mission-driven individuals who want to assist their chosen cause. Compounding the issue is that some NPOs do not operate in a manner similar to most businesses, or only seasonally. This leads many young and driven employees to forego NPOs in favor of more stable employment. Today, however, nonprofit organizations are adopting methods used by their competitors and finding new means to retain their employees and attract the best of the newly minted workforce. It has been mentioned that most nonprofits will never be able to match the pay of the private sector and therefore should focus their attention on benefits packages, incentives and implementing pleasurable work environments. A good environment is ranked higher than salary and pressure of work. NPOs are encouraged to pay as much as they are able and offer a low-stress work environment that the employee can associate him or herself positively with. Other incentives that should be implemented are generous vacation allowances or flexible work hours.


Online presence

Many NPOs often use the
.org The domain name org is a generic top-level domain (gTLD) of the Domain Name System (DNS) used on the Internet. The name is truncated from ''organization''. It was one of the original domains established in 1985, and has been operated by the Pub ...
or .us (or the
country code top-level domain A country code top-level domain (ccTLD) is an Internet top-level domain generally used or reserved for a country, sovereign state, or dependent territory identified with a country code. All ASCII ccTLD identifiers are two letters long, and all two ...
of their respective country) or .edu
top-level domain A top-level domain (TLD) is one of the domains at the highest level in the hierarchical Domain Name System of the Internet after the root domain. The top-level domain names are installed in the root zone of the name space. For all domains in lo ...
(TLD) when selecting a
domain name A domain name is an identification string that defines a realm of administrative autonomy, authority or control within the Internet. Domain names are used in various networking contexts and for application-specific naming and addressing purposes. ...
to differentiate themselves from more commercial entities, which typically use the .com space. In the traditional domain noted in , .org is for 'organizations that didn't fit anywhere else' in the naming system, which implies that it is the proper category for non-commercial organizations if they are not governmental, educational, or one of the other types with a specific TLD. It is not designated specifically for charitable organizations or any specific organizational or tax-law status; however, it encompasses anything that is not classifiable as another category. Currently, no restrictions are enforced on registration of .com or .org, so one can find organizations of all sorts in either of these domains, as well as other top-level domains including newer, more specific ones which may apply to particular sorts of organization including .museum for museums and .coop for
cooperative A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise".Ashoka: Innovators for the Public. Advocates argue that these terms describe the sector in its own terms, without relying on terminology used for the government or business sectors. However, use of terminology by a nonprofit of self-descriptive language that is not legally compliant risks confusing the public about nonprofit abilities, capabilities, and limitations. In some Spanish-language jurisdictions, nonprofit organizations are called "civil associations".


See also

*
Association without lucrative purpose (Dutch, abbreviated ''vzw'') or (French, abbreviated ''asbl'') or (German, abbreviated ''VoG'') is the legal term for a non-profit organization in Belgium; the French term also applies in Luxembourg and the Democratic Republic of the Congo. For i ...
*
Community organizationCommunity organization or Community Based Organization refers to organizing aimed at making desired improvements to a community's social health, well-being, and overall functioning. Community organization occurs in geographically, psychosocially, cul ...
*
Effective altruism Effective altruism is a philosophy and social movement that advocates using evidence and reasoning to determine the most effective ways to benefit others. ''Altruism'' refers to improving the lives of others—as opposed to egoism, which emphasizes ...
*
Fundraising Fundraising or fund-raising is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies. Although fundraising typically refers to efforts to gather ...
*
Master of Nonprofit Organizations The Master of Nonprofit Organizations (MNO or MNPO), Master of Non-profit Management (MNM), Master of Not-for-Profit Leadership (MNPL), Master of Nonprofit Studies (MNpS), Master of Public Affairs (MPA), Master of Philanthropic Studies, Master of ...
*
Mutual organization A mutual, mutual organization, or mutual society is an organization (which is often, but not always, a company or business) based on the principle of mutuality and governed by private law. Unlike a true cooperative, members usually do not contribu ...
*
Non-commercial A non-commercial (also spelled noncommercial) activity is an activity that does not, in some sense, involve commerce, at least relative to similar activities that do have a commercial objective or emphasis. For example, advertising-free community ...
*
Non-governmental organization upright=1.3, alt=A roomful of people, Europe-Georgia Institute head George Melashvili addresses the audience at the launch of the "Europe in a suitcase" project by two NGOs (the EGI and the Friedrich Naumann Foundation), which aims to increase ...
*
Non-profit organizations and access to public information When government agencies outsource basic services to third-party non-profit contractors, one consequence is that the public may lose its access to information about the service that the public would have retained, had a government agency carried out ...
*
Non-profit technologyNonprofit technology is the deliberative use of technology by nonprofit organizations to maximize potential in numerous areas, primarily in supporting the organization mission and meeting reporting requirements to funders and regulators. Types of te ...
*
Occupational safety and health Occupational safety and health (OSH), also commonly referred to as occupational health and safety (OHS), occupational health, or occupational safety, is a multidisciplinary field concerned with the safety, health, and welfare of people at occupat ...
*
Social economy#REDIRECT Social economy {{R from other capitalisation ...
*
Supporting organization (charity)300px, IRS Supporting Organization Flow Chart A supporting organization, in the United States, is a public charity that operates under the U.S. Internal Revenue Code i26 USCA 509(a)(3) A supporting organization either makes grants to, or performs the ...
* United States non-profit laws *
Voluntary sector The voluntary sector, independent sector, or civic sector is the duty of social activity undertaken by organizations that are non-governmental nonprofit organizations. This sector is also called the third sector, community sector, and nonprofit sec ...


References


Further reading

* Snyder, Gary R.
''Nonprofits: On the Brink : How Nonprofits have lost their way and some essentials to bring them back''
2006. * P. Hartigan, 2006
'It's about people, not profits'
''Business Strategy Review'', Winter 2006


External links

*
Nonprofits & Philanthropy Research at IssueLab
{{DEFAULTSORT:Non-Profit Organization * Types of organization
Trade unions Trade or labor unions are unions formed around professional, occupational, trade, and labor activities. {{portal, Organized Labour Labour movement * Occupational organizations Organizations by membership Orga ...
Television terminology {{CatAutoTOC Terminology Terminology Television categories for deletion scanning ...
Social economy {{JEL code, Z1 Mixed economies ...