Characteristics of a Nonprofit Organization
The term "Nonprofit" is a misnomer, as a nonprofit may legally and properly make a profit, as the concept is usually understood. The most important distinction between a profit and a nonprofit organization is whether the organization abides by the "non-distribution principle". A nonprofit operates for public purposes, not for private purposes. The earnings of a nonprofit may not be distributed to members, directors, or employees, and only reasonable compensation (such as salaries) is permissible.
Professor Henry Hansmann explained the “non-distributional principle as follows: “All Nonprofit Organizations must be used for exempt purposes. A nonprofit organization is, in essence, an organization
…show more content…
Nonprofit organizations, for example, are taxed for Unrelated Business Activities (UBIT), as discussed in this research guide.
The federal exemption from the income tax and income tax deductibility of charitable contributions are two major topics covered in nonprofit law.
There are two major categories of nonprofit organizations: 1) public service organizations -- Public charities and foundations [§501 c (3) , social welfare (§501c4) , and §527 organizations (at least theoretically]; and, 2) mutual benefit (member-serving) organizations) that are organized to further common goals of its members. It is crucial to obtain §170 status because it makes almost all receive deductible contributions. Also, Nonprofits are entitled to state law tax-deductions (property and sales tax deductions), and reduced rates in mailing their materials. Among the significant roles that Nonprofit organizations have in society are that they promote political pluralism (for novel and unpopular causes). Certain nonprofits such as hospitals) represent some of the most significant sectors of the American
…show more content…
Nonprofit Organizations (NPOs) also operate in a critically important space between American society’s private and public spheres. Both policymakers and the public have often either misunderstood or overlooked the nonprofit sector. Extending from neighborhood grass-roots organizations to very large health care entities, the nonprofit sector is both immense and diverse. Nonprofit Organizations engage themselves in a wide variety of endeavors, including culture, economic development, education, environment, and health.
Some nonprofits are crucially important and visible and have a tremendous amount of assets, while others are small and struggle financially. Considering the nonprofit sector 's complicated nature and diversity, the characteristics of one Nonprofit Organization do not necessarily apply to another. Despite their critical importance in the United States, nonprofits have only recently been recognized for their crucial role in the nation 's economy and society. Nonprofit Organizations even have a role in American foreign