Sunday, October 01, 2006
What IS a Non-Profit or Not-For-Profit?
There is a mis-conception amongst the general population as to WHAT a non-profit is. Most people seem to think that the mission of a non-profit is to not make money. This simply isn't the case.
The basic track for an entity to become a non-profit runs something like this.
1) A group of people have an idea for a non-profit company
2) Articles of Incorporation are drafted by the group.
3) The newly formed company files for non-profit status with the IRS. There are many different kinds of non-profit entities with different purposes. But the long and short is if the organization is going to be educational or philanthropic, they can apply for non-profit status.
A non-profit must make money to survive. Just like any other company, if they can not pay the bills then they will fold. The difference between for-profit and non-profit is that in a for-profit venture share holders benefit from profit made by the company. In a non-profit, all profits go back into the company--sometimes re-distrubuted as grants, sometimes ending up in a cash reserve, and sometimes being used for re-investment in the company.
Non-profits are businesses and should not be maligned when they turn a profit. In fact, they should be applauded for being a success.
The basic track for an entity to become a non-profit runs something like this.
1) A group of people have an idea for a non-profit company
2) Articles of Incorporation are drafted by the group.
3) The newly formed company files for non-profit status with the IRS. There are many different kinds of non-profit entities with different purposes. But the long and short is if the organization is going to be educational or philanthropic, they can apply for non-profit status.
A non-profit must make money to survive. Just like any other company, if they can not pay the bills then they will fold. The difference between for-profit and non-profit is that in a for-profit venture share holders benefit from profit made by the company. In a non-profit, all profits go back into the company--sometimes re-distrubuted as grants, sometimes ending up in a cash reserve, and sometimes being used for re-investment in the company.
Non-profits are businesses and should not be maligned when they turn a profit. In fact, they should be applauded for being a success.
