What is a Nonprofit?
What is a Nonprofit? Answer: The term, nonprofit, is used rather loosely to describe groups that come together to achieve a mission, rather than to make a profit. The term “nonprofit” does not imply any specific type of legal structure. If the group incorporates, it is a nonprofit corporation. If it does not incorporate, it is an unincorporated nonprofit association. Examples of unincorporated nonprofit associations could include a group of neighbors who want to keep a neighborhood park clean and kept up, or a group of soccer dads who sell candy to fund their children’s trips to soccer tournaments. Both groups could be called “nonprofits” simply because they are mission-driven, not profit-driven. Let’s say the park group never does anything to create a formal structure. It would be considered an unincorporated nonprofit association. The soccer dads take another route and file papers with the state to become a corporation. The group is then a nonprofit corporation.
A. A nonprofit (abbreviated “NPO,””nonprofit” or “not-for-profit”) is an entity formed for purposes other than making a profit. Nonprofits are formed pursuant to different state laws than standard for-profit corporations; however, the process of forming a nonprofit is very similar. In order to form a nonprofit, nonprofit articles of incorporation or a nonprofit certificate of incorporation must be filed with the appropriate state agency and the necessary state filing fees paid. The formation documents must include certain clauses and information, such as a very detailed business purpose statement, in order for the entity to qualify for tax-exempt status. To be considered tax-exempt, nonprofits must apply for federal and state (if applicable) tax-exempt status. Tax-exempt status is not automatically granted once the nonprofit is formed. To apply for federal tax-exempt status, Form 1023 must be filed with the Internal Revenue Service (IRS).
A nonprofit is an organization which is run to further some sort of ideal or goal, rather than in the interests of profit. Many nonprofits serve the public interest, but some do engage in private sector activities, and nonprofits run the gamut from political think tanks to environmental defense organizations. In many nations, nonprofits are treated differently than other businesses under the law, and they may have a tax-exempt status and other special treatment which is designed to encourage the formation of nonprofits, as most governments recognize that they are beneficial. You may also hear a nonprofit referred to as a not for profit or community service organization, and there are a number of other specialized terms used by various nonprofits all over the world. In all cases, the defining characteristic of a nonprofit is that its primary goal is not profit. However, many nonprofits do in fact generate a profit, although the profit is referred to as a “surplus,” and the funds must be
In the broadest terms, a nonprofit is defined as an organization that does not have owners who profit when revenues exceed expenses. In other words, a nonprofit may make a “profit,” but it does not distribute its profit to individuals or shareholders as a for-profit organization would. In addition, all of a nonprofit s programs or activities must uphold the organization s stated mission which describes the nature of its contribution to society. What is the difference between tax exempt and tax-deductible? Nonprofit does not necessarily mean tax exempt or tax-deductible. Organizations must apply to the IRS for tax exempt status, which only means they are exempt from paying income taxes. However, an organization may be tax exempt without being qualified to receive tax-deductible donations. In order for a tax exempt organization to receive tax-deductible donations, its activities must have been determined “charitable” by the IRS under the provisions of section 501(c)(3) of the Internal Re
is a group with a purpose other than raising money to make a profit. These groups are defined by what they do with the money that they raise or earn throughout the year. In the United States, there are more than 800,000 nonprofit organizations—corporations, community chests, funds and foundations—that are estimated to hold more than $1 trillion in assets collectively.
