What is a non-profit organization?


A non-profit organization is one that, by law, is unable to hold or distribute profits like a "for-profit" organization can. This means that the non-profit company is required by law to redistribute any "profits" back into the company (in the form of salaries, new capital, etc), or to other non-profits or to charity. This also means that non-profit companies do not have the ability to issue or sell stock/shares and, therefore, cannot pay dividends on any earnings.

Furthermore, non-profit companies may be required to have an unpaid (volunteer) board of directors with a larger number of directors than a business corporation.

Although some non-profits may run very similar to some for-profit companies, the laws restricting the two are very different.

Non-Profit Organizations are mainly those which is set up for philanthropic purposes. Social Organizations that collects money and utilize for some social work, is one example, but there are thousands of others.

It should also be noted that a non-profit organization is not necessarily "tax-exempt" and may have to pay income taxes and collect sales taxes on its products and services.


Note that a Non Profit Organization should not be confused with a Non Governmental Organization.