A nonprofit organization (NPO), also known as a nonbusiness entity,[1] nonprofit institution,[2] or simply a nonprofit,[a] is a legal entity organized and operated for a collective, public or social benefit, as opposed to an entity that operates as a business aiming to generate a profit for its owners. A nonprofit organization 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. Depending on the local laws, charities are regularly organized as non-profits. A host of organizations may be nonprofit, including some political organizations, schools, hospitals, business associations, churches, foundations, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without having tax-exempt status.
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. Theoretically, 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. Supposedly, the more a nonprofit focuses on their mission, the more public confidence they will gain. This will result in more money for the organization.[1] 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.
There is an important distinction in the US between non-profit and not-for-profit organizations (NFPOs); while an NFPO does not profit its owners, and money goes into running the organization, it is not required to operate for the public good. An example is a sports club, whose purpose is its members' enjoyment.[3] The names used and precise regulations vary from one jurisdiction to another.
- ^ a b Ciconte, Barbara L.; Jacob, Jeanne (2009). Fundraising Basics: A Complete Guide. Burlington, Massachusetts: Jones & Bartlett Learning. ISBN 9780763746667.
- ^ "System of National Accounts" (PDF). United Nations Statistics Division. 1993. Archived from the original (PDF) on 17 October 2013. Retrieved 16 October 2013.
- ^ Heaslip, Emily (6 February 2023). "Nonprofit, Not-for Profit & For-Profit Organizations Explained". US Chambers of Commerce. Archived from the original on 11 January 2024.
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