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What is a Nonprofit?

Mary McMahon
Updated May 16, 2024
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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 used to further the goal of the organization, rather than being split among high ranking members of the organization.

Many nonprofits support themselves with the assistance of donations from the public and various foundations, and some use these donations to make sound investments in the hopes of generating additional funds to support operating costs. Nonprofit foundations are specifically in the business of providing monetary support to other nonprofits: the Bill and Melinda Gates Foundation, for example, disburses grants to charities which support its causes.

Many nonprofits pick important social causes like education, health care, the arts, and the environment to support, and they can take a number of forms, from organizations which dispatch doctors to developing countries to radio stations. In many cases, a nonprofit relies heavily on the support of unpaid volunteers who believe in the cause that the organization champions.

There is a lot of room for abuse in the nonprofit sector, as evidenced by hefty compensation packages for the directors of some well-known nonprofits. To protect the integrity of nonprofit values, nonprofits are required to submit supporting paperwork to protect their status, and they may be subject to audits and other investigatory measures. Some nonprofits like to establish boards to monitor their activities, in the goal of keeping their intentions pure.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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