Help understanding definition of non-profit organization?
I need help understanding what a non-profit organization is, in simple terms. It seems like this should be easy enough: a NPO is an organization that does not exist to make money. But how does a group like this pay its employees?
I'm thinking specifically of the NCAA - a NPO that paid its President something like $600K last year, in addition to a free house, $12K car allowance, etc. How is that "non-profit?"
Clearly, my understanding of the term "non-profit organization" is very elementary, so can someone help me understand it more clearly?
- PatLv 77 years agoFavorite Answer
I am SO very tired of this question.
I'm really so very tired of 14 year old girls coming here and wanting to "start a charity to help poor people"
I know they have good intentions.
But that's not enough.
PROFIT and MONEY are two entirely different things.
ALL HUMAN BEINGS NEED MONEY.
A nonprofit organization is a corporation, just like Sears, or General Motors, or McDonald's.
They all bring in money.
Profit making companies get it by selling goods or services.
Noprofits get it by collecting donations from the public, foundations, the government, etc. and by charging fees for their services.
A nonprofit corporation is a legal entity.
Creating one is a very complex and expensive legal process.
Only an adult can do this.
No, teenagers can not do it.
You must file Articles of Incorporation in your home state, verify that the name you choose is available, apply to the IRS for tax exempt status, obtain an EIN, state solicitation license, and sales tax exemption certificate, create a board of directors, elect board officers, establish a place of business, adopt by laws, hold regular board meetings, keep publicly-available minutes of those meetings, and file umpteen financial reports with local, state, and federal government agencies.
That will cost between $1,000 and $2,000, not counting lawyers' fees.
THEN you can begin to collect money for your activities.
If you don't do that, you do not have a nonprofit.
You have a hobby.
And you can go to jail for soliciting without a license.
We can not allow just anyone to collect money from the public and claim they will "give it to poor people".
All organizations - profit and nonprofit - have expenses.
Rent - utilities - office furnishings, supplies, and equipment - wages, salaries, and employee benefits - transportation - insurance - lawyer and accounting fees - and lots more.
Believe me, they get nothing for free.
And yes, wages.
Ten percent of the American public works for nonprofits - paychecks, vacations, sick days, health insurance, pensions, the whole nine yards.
The Red Cross, Salvation Army, United Way, most universities and hospitals, churches, homeless shelters, athletic organizations, boy and girl scouts, United Auto Workers Union, NCAA, Republican Party, Democratic Party, US Chamber of Commerce, Planned Parenthood, Public Broadcasting System, are all nonprofit.
Do you think they operate without money?
Do you think the millions of people who work for them do it all for free?
There are no laws about it, but a nonprofit that spends no more than about 20% of its income on administrative expenses - like those listed above - is considered to be well -run.
The rest of the money goes to program expenses.
When the company brings in more money than it spends, the excess is called a profit.
The company can distribute that profit to its stockholders.
When the nonprofit organization brings in more money than it spends, the excess is called a fund balance.
There are no stockholders.
The money stays with the organization to continue its work.
They can keep some in savings for future projects, or for emergencies, or whatever, or they can put it all back into the organization immediately.
There are thousands of rules governing both for-profits and nonprofits.
For profits pay taxes.
Nonprofits do not, but they do file extensive income and expense reports with the IRS and other government agencies.
Charities are only one of about 32 different categories of nonprofits.
The others are political, labor union, trade associations, etc.
Lots of detailed info here.Source(s): I have been a volunteer, staff, manager, board member, board president, consultant, and lobbyist for nonprofits for 30 years.
- Anonymous8 years ago
Non profit organizations actually do not sell things or they do not ask you to pay for something. It does not mean that they do not make any profit at all. Let me give you an example:
Suppose a website says that this website is non-profit and provides all the information free to you. But the website may be earning through ads running on the website.
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- 5 years ago
what is the role of non profit organizations in society
- 4 years ago