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'A '''non-profit organization''' (abbreviated as '''NPO''', also known as a '''not-for-profit organization'''<ref>The International Center for Not-For-Profit Law. [http://www.icnl.org/contact/faq.htm#difference FAQ: What is the difference between "non-profit" and "not-for-profit"?]</ref>) is an [[organization]] that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.<ref>The Nonprofit Handbook: Everything You Need to Know to Start and Run Your Nonprofit Organization (Paperback), Gary M. Grobman, White Hat Communications, 2008.</ref> Examples of NPOs include charities (i.e. [[charitable organization]]s), [[trade union]]s and public [[art]]s 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 tax|income]] and [[property tax]]ation. ==Non-profit distinction== 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 [[worker|employees]] and [[shareholders]]. By contrast, not-for-profit organizations do not have private 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.<ref>{{cite web|url=http://www.irs.gov/pub/irs-pdf/p4220.pdf |title=Publication 4220 (Rev. 8-2009) |format=PDF |date= |accessdate=2010-07-31}}</ref> 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.<ref>Drucker, Peter (1989). "What Business Can Learn from Nonprofits". Harvard Business Review: 1-7.</ref> ==Nature and goals== NPOs are often [[Charitable organizations|charities]] or service organizations; they may be organized as a not-for-profit corporation or as a [[Charitable Trust|trust]], a [[cooperative]], or they may be purely informal. Sometimes they are also called [[foundation (charity)|foundations]], or [[Financial endowment|endowments]] that have large [[stock fund]]s. A very similar organization called the [[Supporting organization (charity)|supporting organization]] operates like a foundation, but they are more complicated to administer, they are more tax favored, and the public charities that receive grants from them must have a specially determined relationship. Foundations give out [[Grant (money)|grants]] to other NPOs, or fellowships and direct grants to participants. However, the name ''[[foundation (charity)|foundations]]'' may be used by any not-for-profit corporation&nbsp;— even [[volunteer]] organizations or [[grass roots]] groups. Applying Germanic or Nordic law (e.g., [[Germany]], [[Sweden]], [[Finland]]), NPOs typically are [[voluntary association]]s, although some have a corporate structure (e.g. [[housing cooperative]]s). Usually a voluntary association is founded upon the principle of one-person-one-vote.{{Citation needed|date=July 2007}} ==Legal aspects== There is a wide diversity of structures and purposes in the NPO landscape. For legal classification and eventual scrutiny, there are, nevertheless, some structural elements of prime legal importance: * Economic activity * Supervision and management provisions * Representation * Accountability and Auditing provisions * Provisions for the amendment of the statutes or articles of incorporation * Provisions for the dissolution of the entity * Tax status of corporate and private donors * Tax status of the foundation Some of the above must be, in most jurisdictions, expressed in the document of establishment. 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 in legal proceedings as an indication of purpose. Most countries have laws which regulate the establishment and management of NPOs, and which require compliance with [[corporate governance]] regimes. 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 entity|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 [[Church (building)|churches]], which are often not required to disclose finances to anyone, including church members. ===Formation and structure=== In the [[United States]], nonprofit organizations are formed by incorporating in the state in which they expect to do business. The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and own property as any other individual or for-profit corporation may do. Nonprofits can have members but many do not. The nonprofit may also be a [[Trust (law) USA|trust]] or [[Voluntary association|association]] of members. The organization may be controlled by its members who elect the [[Board of Directors]], [[Board of Governors]] or [[Board of Trustees]]. Nonprofits 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. A primary difference between a nonprofit and a for-profit corporation is that a nonprofit does not issue stock or pay dividends, (for example, The Code of the [[Commonwealth of Virginia]] includes the [[Non-stock corporation|Non-stock Corporation]] Act that is used to incorporate nonprofit entities) and may not enrich its [[Managing director|directors]]. However, like for-profit corporations, nonprofits may still have employees and can compensate their [[Managing director|directors]] within reasonable bounds. The two major types of nonprofit organization structure are membership and [[board-only]]. A membership organization elects the board and has regular meetings and 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 the organization has no membership, although the organization's literature may refer to its donors as "members"; examples of such structures are [[Fairvote]]<ref>[http://www.fairvote.org/?page=6 FairVote - Board of Directors<!-- Bot generated title -->].</ref><ref>[http://www.fairvote.org/?page=168 FairVote - FAQs<!-- Bot generated title -->].</ref> and the [[National Organization for the Reform of Marijuana Laws]].<ref>[http://norml.org/index.cfm?Group_ID=3416 NORML Board of Directors - NORML<!-- Bot generated title -->].</ref> The [[Model Nonprofit Corporation Act]] imposes many complexities and requirements on membership decision-making. Accordingly, many organizations , such as [[Wikimedia]],<ref>{{cite web|url=http://wikimediafoundation.org/wiki/Wikimedia_Foundation_bylaws#ARTICLE_III_-_MEMBERSHIP |title=Bylaws |publisher=Wikimedia Foundation |date=2010-07-14 |accessdate=2010-07-31}}</ref> have formed board-only structures. The [[National Association of Parliamentarians]] has raised concerns about the implications of this trend for the future of openness, accountability, and understanding of grassroots concerns in nonprofit organizations. Specifically, they note that nonprofit organizations, unlike business corporations, are not subject to market discipline for products and shareholder discipline over their capital; therefore, without membership control of major decisions such as election of the board, there are few inherent safeguards against abuse.<ref>{{Cite document |title=ABA Code Revision Raises Concerns for Democracy and Parliamentary Law in Nonprofits|author=Malamut, Michael E. and Blach, Thomas J. |publisher=National Parliamentarian, Volume 69, No. 1 |year=2008 |postscript=<!--None-->}}</ref><ref>''Charity on Trial: What You Need to Know Before You Give'' / Doug White (2007) ISBN 1-56980-301-3.</ref> A rebuttal to this might be that as nonprofit organizations grow and seek larger donations, the level of scrutiny rises, including expectations of audited financial statements.<ref>[http://papers.ssrn.com/sol3/papers.cfm?abstract_id=727363 SSRN-Voluntary Disclosure in Nonprofit Organizations: an Exploratory Study by Bruce Behn, Delwyn DeVries, Jing Lin<!-- Bot generated title -->].</ref> ===Tax exemption=== In many countries, nonprofits may apply for [[tax exempt 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 by the [[Internal Revenue Service]].<ref>{{cite web|url=http://www.irs.gov/charities/article/0,,id=136195,00.html |title=Applying for Exemption - Difference Between Nonprofit and Tax-Exempt Status |publisher=Irs.gov |date= |accessdate=2010-07-31}}</ref> ===Finland=== In [[Finland]], "rekisteröity yhdistys", given the abbreviation ry, denotes a registered association. This is done at a cost of 75 Euro. The association is required by law to keep a list of members. It must also hold an AGM and at least 3 members are required to set it up, a secretary, chair and treasurer being the usual formation. ===India=== In [[India]], NPOs are commonly known as Non-Governmental Organizations (NGOs). They can be registered in four ways: # Trust # Society # Section-25 Company # Special Licensing Registration can be done with the Registrar of Companies(RoC). 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 * Foreign Contribution (Regulation) Act, 1976 ===South Africa=== In [[South Africa]], charities issue a tax certificate when requested by donors which can be used as a tax deduction by the donor.<ref>[http://www.breadlineafrica.org/faq/index.html South African Charities].</ref> ===United Kingdom=== In the UK, many non-profit companies are incorporated as a [[company limited by guarantee]]. This means that the company does not have shares or shareholders, but it has the benefits of [[corporate]] status. This includes [[limited liability]] for its members and being able to enter into contracts and purchase property in its own name. The goals ("objects") of the company are defined in the [[Memorandum of Association]] when the company is formed. The profits of the company (also referred to as the trading surplus) must be invested in achieving these goals and not distributed to the company's members.<ref>{{cite web|url=http://www.sfsgo.com/guaranteecompany.asp |title="Company Limited by Guarantee", Small Firms Services Ltd |publisher=Sfsgo.com |date= |accessdate=2010-07-31}}</ref> Since the Companies act 2006, non-profit companies may be formed as a [[Community Interest Company]] (CIC). These are forms of [[company limited by guarantee]] or [[company limited by shares]] but with special conditions and are intended specifically to ensure that the profits and assets of the company are used for public good, even when run for (limited) profit.<ref>{{cite web|url=http://www.cicregulator.gov.uk/ |title=CIC regulator}}</ref> A [[charitable organization#United Kingdom|charity]] is a non-profit organisation that meets stricter criteria regarding its purpose and the way in which it makes decisions and reports its finances.<ref>[http://www.charitypeople.com/documents/WhatIsTheNotForProfitSector.pdf "What is the Not For Profit Sector?", Charity People].</ref> For example, a charity is generally not allowed to pay its Trustees. In [[England and Wales]], charities may be registered with the [[Charity Commission]].<ref>[http://www.charity-commission.gov.uk/registration/regreq.asp#a Charity Commissioners information page].</ref> In [[Scotland]], the [[Office of the Scottish Charity Regulator]] serves the same function. Other organizations which are classified as non-profit organizations elsewhere, such as trade unions, are subject to separate regulations, and are not regarded as "charities" in the technical sense. ===United States=== :''For a United States analysis of this issue, see [[501(c)]] and [[Charitable organization#United States|United States Charitable Organization]].'' After a recognized type of legal entity has been formed at the state level, it is customary for the nonprofit organization to seek tax exempt status with respect to its [[Income tax in the United States|income tax]] obligations. That is typically done by applying to the Internal Revenue Service (IRS), although statutory exemptions exist for limited types of nonprofit organizations. 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.<ref>{{cite web |url=http://www.irs.gov/charities/article/0,,id=96106,00.html |title=Special rules for unrelated business income tax |publisher=U.S. Internal Revenue Service |accessdate=2007-08-19}}</ref> Failure to maintain operations in conformity to the laws may result in an organization losing its tax exempt status. Individual states and localities offer nonprofits exemptions from other taxes such as [[sales tax]] or [[property tax]]. Federal tax-exempt status does not guarantee exemption from state and local taxes, and vice versa. These exemptions generally have separate application processes 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]]) at the state and federal level.''<!--111 what is this number?--> ===Belgium=== Under Belgian law, there are several kinds of non-profit organisations: * ''[[Vereniging zonder winstoogmerk]]'' ([[Dutch language|Dutch]], abbreviated ''[[vzw]]'') or ''[[Association sans but lucratif]]'' ([[French language|French]], abbreviated ''[[asbl]]''). * ''[[Internationale vereniging zonder winstoogmerk]]'' ([[Dutch language|Dutch]], often abbreviated ''[[ivzw]]'') or ''[[Association internationale sans but lucratif]]'' ([[French language|French]]; often abbreviated ''[[aisbl]]'') for international non-profit organisations. * ''[[Stichting van openbaar nut]]'' ([[Dutch language|Dutch]], abbreviated ''son'') or ''[[Fondation d’utilités publique]]'' ([[French language|French]], abbreviated ''fup''). These three kinds of non-profit organisations are in contrast to a fourth: * ''[[Feitelijke vereniging]]'' ([[Dutch language|Dutch]]) or ''[[Association de fait]]'' ([[French language|French]]) a kind of organisation that, by definition, does not have any members (association sans personnalité morale). ==Issues faced by NPOs== [[Capacity building]] is an ongoing problem faced by NPOs for a number of reasons. Most rely on external funding (government funds, grants from [[charitable foundation]]s, direct donations) to maintain their operations and changes in these sources of revenue may influence the reliability or predictability with which the organization can hire and retain staff, sustain facilities, create programs, or maintain tax-exempt status. For example, a university that sells research to for-profit companies may face tax exemption issues or internal politics purportedly related to that. In addition, unreliable funding, long hours and low pay can lead to employee [[Burnout (psychology)|burnout]] and high [[Turnover (employment)|turnover]] rates. In 2009, US nonprofits saw government acknowledge this critical need through the inclusion of the [http://www.councilofnonprofits.org/public-policy/federal-issues/nonprofit-capacity-building Nonprofit Capacity Building Program] in the Serve America Act. Further efforts to quantify the scope of the sector and propose policy solutions for community benefit were included in the [http://www.councilofnonprofits.org/nscsact Nonprofit Sector and Community Solutions Act], proposed in 2010 by Congresswoman [[Betty McCollum]]. [[Founder's syndrome]] is an issue organizations face as they grow. Dynamic founders with a strong vision of how to operate the project try to retain control over the organization, even as new employees or volunteers want to expand the project's scope and try new things. Resource mismanagement is a particular problem with NPOs because the employees are not accountable to anybody with 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 image, 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]]. But even indirect liabilities negatively affect the financial sustainability of the NPO, and the NPO will have financial problems unless strict controls are instated.<ref>Audit Guide for Small Nonprofit Organizations http://www.vscpa.com/content/Visitors/Nonprofit_Resources/Audit_Guide.aspx</ref> ==Examples== In the [[United States]], two of the wealthiest non-profit organizations are the [[Bill and Melinda Gates Foundation]], which has an endowment of $38 billion,<ref>{{cite web|url=http://www.gatesfoundation.org/nr/public/media/annualreports/annualreport07/AR2007Statements.html |title=Bill and Melinda Gates Foundation Annual Report 2007 - 2006 Combined Financial Statements |publisher=Gatesfoundation.org |date= |accessdate=2010-07-31}}</ref> and the [[Howard Hughes Medical Institute]], which has an endowment of approximately $14.8 billion. Outside the United States, another large NPO is the British [[Wellcome Trust]], which is a "charity" in British usage. See: [[List of wealthiest foundations]]. Note that this assessment excludes [[university|universities]], at least a few of which have assets in the tens of billions of dollars. For example; [[List of U.S. colleges and universities by endowment]] Measuring an NPO by its monetary size has obvious limitations, as the power and significance of NPOs are defined by more qualitative measurements such as effectiveness at carrying out charitable mission and goals. Some NPOs which are particularly well known, often for the charitable or social nature of their activities conducted over a long period of time, include [[Amnesty International]], [[Oxfam]], [[Rotary International]], [[Carnegie Corporation of New York]], [[DEMIRA Deutsche Minenräumer]] (German Mine Clearers), [[International Federation of Human Rights|FIDH International Federation for Human Rights]], [[Goodwill Industries]], [[United Way of America|United Way]], [[National Rifle Association|The National Rifle Association]], [[Association of Community Organizations for Reform Now|ACORN]](now defunct), [[Habitat for Humanity]], [[Teach For America]], the [[Red Cross]] and [[Red Crescent]] organizations, [[UNESCO]], [[IEEE]], [[World Wide Fund for Nature]], [[Heifer International]], and [[SOS Children's Villages - USA|SOS Children's Villages]]. However, there are also millions of smaller NPOs that provide [[social services]] and relief efforts on a more focused level to people throughout the world. There are more than 1.6 million NPOs in the United States alone. ==On the Internet== Many NPOs often use the [[.org]] or [[.us]] (or the [[CCTLD]] of their respective country) or [[.edu]] [[top-level domain]] (TLD) when selecting a [[domain name]] to differentiate themselves from more commercially focused entities which typically use the [[.com]] space. In the traditional domain categories as noted in RFC 1591, .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 specifically designated for charitable organizations or any specific organizational or tax-law status, however; it encompasses anything that does not fall into another category. Currently, no restrictions are enforced on registration of .com or .org, so you 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 fit particular sorts of organizations such as [[.museum]] for museums or [[.coop]] for [[cooperative]]s. Organizations might also register under the appropriate [[country code top-level domain]] for their country. ==Other terminology for the sector== There is a growing movement within the “non”-profit and “non”-government sector to define itself using more proactive wording. Instead of being defined by “non” words, organizations are suggesting new terminology to describe the sector. The term “civil society organization” (CSO) has been used by a growing number of organizations, such as the [[Center for the Study of Global Governance]].<ref>:Glasius, Marlies, Mary Kaldor and Helmut Anheier (eds.) [http://www.lse.ac.uk/Depts/global/yearbook06-7.htm "Global Civil Society 2006/7"]. London: Sage, 2005.</ref> The term “citizen sector organization” (CSO) has also been advocated to describe the sector&nbsp;— as one of citizens, for citizens&nbsp;— by organizations such as [[Ashoka: Innovators for the Public]].<ref>Drayton, W: [http://www.alliancemagazine.org/free/html/jun07a.html "Words Matter"]. Alliance Magazine, Vol. 12/No.2, June 2007.</ref> This labels and positions the sector as its own entity, without relying on language used for the government or business sectors. However, use of terminology by a nonprofit of self-descriptive language such as "public service organization" or other term that is not legally compliant risks confusing the public about nonprofit abilities, capabilities and limitations.<ref>Alvarado, Elliott I.: "Nonprofit or Not-for-profit -- Which Are You?", page 6-7. Nonprofit World, Volume 18, Number 6, November/December 2000.</ref> ==Education== * [http://npo.unige.ch/ University of Geneva: Certificate of Advanced Studies (CAS) "Modern Management for Non Profit Organizations"] * [http://www.csi.uni-heidelberg.de/master_e.htm Centre for Social Investment, Heidelberg University "Nonprofit Mangagement & Governance"] * [http://www.wiso.hs-osnabrueck.de/master-npo.html University of Applied Sciences Osnabrück "MA in Non-Profit Organizations"] * [http://iaopc.org.ru international association of professional certification,(iaopc)] ==See also== {{div col|3}} * [[Association without lucrative purpose]] * [[Community organization|Community Organizations]] * [[Fundraising]] * [[Master of Nonprofit Organizations]] * [[Mutual organization]] * [[Non-commercial]] * [[Non-governmental organization]] (NGO) * [[Non-profit organizations and access to public information]] * [[Non-profit sector]] * [[Nonprofit technology]] * [[Occupational safety and health]] * [[Social economy]] * [[Supporting organization (charity)]] * [[United States of America non-profit laws]] * [[:Category:Non-profit organizations]] {{div col end}} ==References== {{Reflist|2}} == Further reading == * Snyder, Gary R., [http://books.google.com/books?id=5OFFNw0a1dkC&printsec=frontcover ''Nonprofits: On the Brink : How Nonprofits have lost their way and some essentials to bring them back''], 2006. * P. Hartigan, 2006, [http://www3.interscience.wiley.com/journal/118624146/abstract 'It's about people, not profits'], ''Business Strategy Review'', Winter 2006 ==External links== * [http://www.donorsearch.net DonorSearch.net helps non-profits find donors] * {{dmoz|Society/Organizations/Nonprofit_Resources/|Nonprofit Resources}} * [http://www.knowhownonprofit.org KnowHow NonProfit] {{Charity}} {{DEFAULTSORT:Non-Profit Organization}} [[Category:Non-profit organizations| ]] [[Category:Types of organization]] [[Category:Article Feedback Pilot]] [[ar:منظمة غير ربحية]] [[bn:অলাভজনক প্রতিষ্ঠান]] [[ca:Organització sense ànim de lucre]] [[da:Almennyttig organisation]] [[de:Non-Profit-Organisation]] [[et:Mittetulundusühing]] [[el:Μη κερδοσκοπική οργάνωση]] [[es:Organización sin ánimo de lucro]] [[eo:Ne-profita organizaĵo]] [[fa:سازمان ناسودبر]] [[fr:Association à but non lucratif]] [[gl:Organización sen ánimo de lucro]] [[ko:비영리 단체]] [[hr:Neprofitne organizacije]] [[id:Organisasi nirlaba]] [[it:Organizzazione non a scopo di lucro]] [[he:מוסד ללא כוונת רווח]] [[lb:Association sans but lucratif]] [[ms:Pertubuhan bukan untung]] [[nl:Non-profit]] [[ja:非営利団体]] [[no:Ideell organisasjon]] [[pl:Organizacja non-profit]] [[pt:Organização sem fins lucrativos]] [[ro:Organizație nonprofit]] [[ru:Некоммерческая организация]] [[sq:Pa profit]] [[simple:Non-profit organization]] [[sk:Nezisková organizácia]] [[sr:Непрофитна организација]] [[fi:Yleishyödyllinen yhteisö]] [[sv:Ideell förening]] [[ta:இலாப நோக்கற்ற அமைப்பு]] [[th:องค์กรไม่แสวงหาผลกำไร]] [[uk:Непідприємницька організація]] [[vi:Tổ chức phi lợi nhuận]] [[wa:Soce nén recwårlante]] [[zh:非營利組織]]'