Non-Profits - What Are They?

What is a non-profit?

"Non-profit organizations are a crucial part of our society, providing help to the needy, education for a lifetime, funds for good causes, and leaders in the community."

A non-profit organization (abbreviated as NPO, also known as a not-for-profit organization) is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples of NPOs include charities (i.e. charitable organizations), trade unions, and public arts organizations. Most governments and government agencies meet this definition, but in most countries they are considered a separate type of organization and not counted as NPOs. They are in most countries exempt from income and property taxation. Ownership is the quantitative difference between for- and not-for-profit organizations. For-profit organizations can be privately owned and may re-distribute taxable wealth to employees and shareholders. By contrast, not-for-profit organizations do not have owners. They have controlling members or boards, but these people cannot sell their shares to others or personally benefit in any taxable way.

While they are able to earn a profit, more accurately called a surplus, such earnings must be retained by the organization for its self-preservation, expansion and future plans. Earnings may not benefit individuals or stake-holders. While some nonprofit organizations put substantial funds into hiring and rewarding their internal corporate leadership, middle-management personnel and workers, others employ unpaid volunteers and even executives may work for no compensation. However, since the late 1980s there has been a growing consensus that nonprofits can achieve their corporate targets more effectively by using some of the same methods developed in for-profit enterprises. These include effective internal management, ensuring accountability for results, and monitoring the performance of different divisions or projects in order to better benefit from their capital and workers. Those require satisfied management and that, in turn, begins with the organization's mission.