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Non-Profit Organizations

A non-profit organization also known as a not-for-profit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples of non-profit organizations include charities, churches, senior centers, and private community based non-profits. Most governments and government agencies such as Critical Access Hospitals, Hospital Districts, Health Districts, and Housing Authorities meet this definition, but are considered a separate type of organization.

Ownership is the difference between for- and not-for-profit organizations. For-profit organizations can be privately owned and may re-distribute taxable income to employees and shareholders. By contrast, not-for-profit organizations do not have private owners. They have controlling members or boards, these people cannot sell their shares to others or personally benefit in any taxable way.

While non–profits can earn a profit, more accurately called a surplus, such earnings must be retained by the organization for its self-preservation, expansion and future plans. Earnings may not benefit individuals or stake-holders.

Non-profit organizations are formed by incorporating in the state in which they do business. The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and own property as any other individual or for-profit corporation may do.

The nonprofit may also be a trust or association of members. The organization may be controlled by its members who elect the Board of Directors, Board of Governors or Board of Trustees

A primary difference between a nonprofit and a for-profit corporation is that a nonprofit does not issue stock or pay dividends; Nonprofits may still have employees and can compensate their directors within reasonable bounds.

The two major types of nonprofit organization structure are membership and board-only. A membership organization elects the board and has regular meetings and power to amend the bylaws. A board-only organization typically has a self-selected board, and a membership whose powers are limited to those delegated to it by the board.

Nonprofits may apply for tax exempt status, so that the organization itself may be exempt from income tax and other taxes.

In the United States, to be exempt from federal income taxes the organization must meet the requirements set forth by the Internal Revenue Service.

 
 

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