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What is a Non-Profit Organization?

Malcolm Tatum
Updated May 16, 2024
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A non-profit organization, also known as an NPO, is an entity that funnels any surplus funds back into the operation of the organization, rather than distributing that surplus to owners or investors. The focus of a not for profit entity is to provide services to one or more sectors of the populace, rather than to generate wealth. There are a number of different types of operations that are classified as non-profit organizations, including charities, religious organizations, trade unions, and associations that provide support to individuals suffering with different types of diseases.

In many nations around the world, non-profit entities enjoy exemption from income and property taxes. The idea behind this approach is that since organizations of this type are focused on offering services and not on earning profits, the exemptions allow them to direct more of their available income directly into providing those services. Generally, that income is generated by donations from supporters who believe in the cause that is the central focus of the non-profit. Depending on local laws, some NPOs are allowed to open interest-bearing accounts or establish investment accounts that also help to generate revenue that is pumped back into the operation.

The identifying characteristic of the non-profit organization is that any earnings generated in support of the organization can be used to benefit anyone connected to the organization. This does not mean that employees do not receive salaries or wages, or cannot have benefit packages that include healthcare and similar benefits. It does mean that any funds not needed to cover the basic day to day operations of the organization are used to preserve and expand the non-profit itself, rather than being distributed to stakeholders and employees.

In order to keep operational costs as low as possible, while still providing viable services to the community, a non-profit will often operate with a core group of employees, including an executive director. To augment the efforts of this core group, the organization will depend on the support of volunteers who help with tasks such as planning and executing fund raising activities, helping with clerical tasks, or taking the services offered by the organization to its targeted audience.

A non-profit may be structured in several different ways. Some are set up as charities or similar types of service organizations. The organization can also be structured as a foundation, a trust, or a cooperative. In many cases, the decision of how to set up a non-profit has to do with the goals of the organization, local laws that govern the establishment and operation of non-profits within the area, and the types of resources that are available to further the work of the organization.

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Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

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Discussion Comments

By w0wpow3r — On Jun 09, 2011

A word of caution: investigate the non-profit before you donate! You should look for a chart of how they spend donations, i.e. For every dollar you donate, how much goes to operational costs and how much is fed into the campaign you are donating?

It can be hard to find this information, but *all* good charities will publicly disclose this information, usually on their website or brochure.

Always check to make sure at least half of your donation will be used for the campaign - there are some non-profits which use more of the donation for operational expenses rather than their campaigns. Who would you want your money to go to more - the people operating the campaign's pockets, or the people/animals/idea that the non-profit is supporting?

By RobsLady — On Jun 07, 2011

@anon133681 - There are several community organizations which may be able to help. If you belong to a church or other religious organization, I would start by asking the leaders about organizations which may help - many churches offer programs, especially during the holidays, for needy families.

You could also inquire at your local Family Resource Center (which could be named differently). Going to a community organization - a church, school, or your local unemployment / TANF benefits office - is your best bet for help.

By anon133681 — On Dec 11, 2010

My husband lost his income and I am currently unemployed, but attending school. We have two great daughters who have been very understanding of our situation.

We live off an income of $364.00 monthly from TANF and do not have any money this year to buy them any Christmas gifts. My husband was electrocuted and is unable to work and he and my 16yr old daughter are diabetics.

Asking for help is not easy for us because we've always tried to be self supporting, but this year is very hard for us. I would really like to get my daughters something because they really don't ask for much and have not complained about our situation.

If there is any organization that helps people in our situation please let me know. Thank you and Happy holidays.

By anon125457 — On Nov 09, 2010

I have been deaf for 13 years. In September, I woke to the fan making noise. To my surprise I was able to hear a little. (God is good.) I went to an audiologist (can't spell) and she said I can use a special hearing aid and I would be able to hear at 50 percent. That would be a life changing experience for me, but the hearing aids I need cost 4,140, which includes the ear molds.

We are on very low income and would like to find out if there is any place out there that can help me? Thank you and God bless.

Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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