Non Profit Organization: Its Distinctions And Types

Non profit organization is a kind of legal entity created for the purpose of providing or engaging in activities of private or public interest. It is operated to carry out certain objectives without monetary return. When talking about non profit organization, the first thing that comes in the minds of many people is a foundation or charities.

However, non profit organization is created with one or more distinguishable purposes. Non profit organizations may engage in a broad range of areas such as humanitarian aid, education, charities, animal protection, environment, the arts, health care, religion, sports, research and other activities.

Non profit organizations are distinct from for-profit enterprises in several aspects. NPO’s are operated not to generate revenues as opposed to for profit entities which have to make commercial activities in order to generate income and earn profits in monetary form. Although non profit organizations are not created for profit, they have the privilege to accept and hold funds and to disburse money to acquire things of value. They may also engage in trading activities at a profit. However, there may be restrictions in using the profits.

Non profit organizations mostly obtain funds from donations from the public or private sectors. It is possible for this type of organization to engage in activities to raise funds. Fundraising activities, however, may be restricted to certain types of non profit entities.

There are certain types of organizations which operate for non profit purpose. Charities, foundations, trust and voluntary organizations are regarded as non profit organizations. They may be organized in the form of not-for profit non-stock corporation although there are mutual organizations established for non profit purpose.

Charitable organization is the most typical kind of non profit organization. This is an organization established for mere charitable purpose although other types of non profit organizations that partially dedicated to charitable activities are also considered charities. Religious organizations which are composed of religious persons and lay individuals normally operate in non profit type of organization. Aside from propagation of religion to areas, these organizations may also engage in charities and educational support. The Catholic Church is

Foundations are created more primarily for charitable purposes aside from collective purposes. A foundation can obtain funding through its own means to finance its charitable activities. It may also provide support to individuals or other organizations or may donate funds. In the United States, a private foundation is distinguished from public charities for taxation purpose. Both are created for charitable purpose however their tax treatment can be different. Private foundation is more prone to regulations by the government and has fewer tax benefits than public charities. Private foundations in the United States are funded by corporation, family or an individual. Philanthropic organizations in the US are frequently regarded to be foundations.

A charitable trust is a kind of trust and is regarded as a specific term to charitable organizations that operate under a trust law.

The nature of a foundation may vary in every jurisdiction. In most cases, it is treated as a legal entity distinct from the owners and persons operating it. The formation and structure of non profit organization may be somewhat similar or different from other entities. Non profit organizations in the United States are usually formed and treated as corporations in the state where they have a business address. Because of this treatment, an NPO in the United States can have the same attributes as for-profit corporations may have.

A primary difference between a non profit organization and for-profit corporation is in the case of capital stocks. The latter issues shares of stocks to its owners who are called shareholders or stockholders while the former does not. Owners of non profit organizations are called members. NPO’s may be operated by volunteers or individuals which can are compensated according to their positions and jobs.

Moreover, non profit corporations may enjoy certain tax privileges than a for profit corporation. Non profits in many countries may apply for tax exempt status. Donations made to non profit organizations particularly charities are tax deductible in many countries.