Non-Profit Organization – Definition

Cite this article as:"Non-Profit Organization – Definition," in The Business Professor, updated September 24, 2019, last accessed October 21, 2020,


Nonprofit Organization Definition

A Nonprofit Organization is an organization established for good cause rather than making profits. This type of organization serves public interests and social responsibility. A nonprofit organization is not subject to taxation by the Internal Revenue Service (IRS), it is tax-exempt. Although, this organization generates income, the income is used to foster good cause. Oftentimes, organizations like this are called charitable organizations that are vested in helping individuals, groups and the society at large.

Nonprofit organizations generate income through donations from individuals and groups, fundraising activities are other ways to source funds. These organizations provide periodic information that helps donors detect whether donations are effectively used or otherwise.

A Little More on What is a Nonprofit Organization

A nonprofit organization is otherwise called a NPO OR a 501(c)(3) organizing. These are organizations that work for the benefits of individuals and groups in the society. These organizations can focus on different areas such as agriculture, research, science, education, religious, public health and safety, crime prevention, technology and others. Nonprofit organizations enjoy tax-exempt status, regardless of the field the operate in.

Rules, Employment and Examples

State or national charities, motherless babies homes, churches, non-governmental foundations, universities, literary organizations, and hospitals are examples of nonprofit organizations. Any organization that render goods and services for public interest or a good cause is a nonprofit organization.

According to the employment laws in the United States, a non-profit organization can have employees which comprises of both paid and unpaid employees. The unpaid employees are volunteers who voluntarily showed interest in working with the organization without any expectation for salary. The paid employees of these organizations do not earn as much as other employees, they are on a lower pay scale and are subject to employment taxes and rules.

Nonprofit Versus Not-for-Profit

A not-for-profit organization (NFPO) is a general name that describes organizations that do not seek private gains, organizations that offer good and services for the benefits of individuals and groups at regular interval without any private benefit of a not-for-profit organization.

NFPO comprises of non-governmental organizations (NGOs), civil society organizations (CSOs), private voluntary organizations (PVOs) and charities.

In some cases, when emphasis is to be placed on the intention of a nonprofit organization, the term; ‘not-for-profit’ organization is used. It is however important to know that a non-profit organization makes profit or income but uses the profit for the projects and operations of the organization, which is to benefit the general public rather than for personal gains.

References for “Nonprofit Organization › Managing Wealth › High Net Worth Strategy › Accounting Dictionary

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