Nonprofit Organizations 101

nonprofit organizations
In the modern world, there are a multitude of companies and organizations dedicated to certain causes, markets and world regions. Companies can be categorized under two main types: for-profit and nonprofit. For-profit companies are focused on making money, while nonprofit organizations are focused on spending money.

Typically, for-profit organizations direct their efforts to making a profit for their officers, members or directors. If they are a publicly-traded company, then the executives are responsible for turning a profit for the shareholders. For-profit organizations are usually required by law to pay both federal and state taxes.

Examples of for-profit companies and organizations include Apple, PepsiCo and Google. These companies make consumer electronics, bottled beverages and specialize in online search engines. All of these companies are publicly traded corporations and earn money for their stockholders and directors.

For-profit corporations are prevalent in people’s lives. Many for-profit companies heavily advertise their products which are used by people all over the world. However, despite having less market exposure and recognition, nonprofit organizations are also extremely important.

A nonprofit organization is defined as a “a group organized for purposes other than generating profit and in which no part of the organization’s income is distributed to its members, directors, or officers.”

Instead of exerting efforts to make money for themselves and their stockholders, nonprofit organizations are focused on spending money to help a particular group or cause.

An example of a nonprofit organization is a church. Churches typically are financed through donations and spend their money on spreading their religion or contributing to causes that could positively impact people’s lives.

The World Food Programme and Planned Parenthood are other examples. Planned Parenthood dedicates its funds to better women’s health through education and to advocate for public policies that are aligned with its mission. The World Food Programme, which is partially funded by the United Nations, dedicates its budget to the procurement of food for communities that have been plagued by disaster.

Typically, nonprofit organizations are not traded on the New York Stock Exchange. Instead of being responsible for responding to those who own the company, they elect to distribute the money to certain causes.

Not all nonprofits are required to pay taxes. Those that apply and are approved to be registered as a “501-c organization” are not required by law to pay taxes.

– Erin Logan

Sources: CNN, Encyclopedia, Society for Nonprofits, Cornell, IRS, Planned Parenthood
Photo: UCONN