Not-for-profit organization

(Redirected from Not-for-profit)

A not-for-profit or non-for-profit organization (NFPO) is a legal entity that does not distribute surplus funds to its members and is formed to fulfill specific objectives.[1] A NFPO does not earn profit for its owners, as any revenue generated by its activities must be put back into the organization.[2]

While not-for-profit organizations and non-profit organizations are distinct legal entities, the terms are sometimes used interchangeably.[3] A NFPO must be differentiated from a non-profit organization (NPO) as it may not be formed explicitly for the public good as an NPO must be, and NFPOs are considered "recreational organizations", meaning that they do not operate with the goal of generating revenue as opposed to NPOs.[1]

FunctionsEdit

A "NFPO" does not have the same obligation as a "NPO" to serve the public good, and as such it may be used to apply for tax-exempt status as an organization that serves its members and does not have the goal of generating profit.[4] An example of this is a sports club, which exists for the enjoyment of its members and thus would function well as a NFPO, with revenue being re-invested into improving the organization.[1]

These organizations typically file for tax exemption in the United States under section 501(c)(7) of the Internal Revenue Code as social clubs.[5] Common ventures for which NFPOs are established include:

  • Charities
  • Sports clubs
  • Foundations
  • Private schools
  • Universities
  • Museums
  • Churches
  • Social welfare organisations

See alsoEdit

ReferencesEdit

  1. ^ a b c Heaslip, Emily (30 March 2020). "Nonprofit, Not-for Profit & For-Profit Organizations Explained". uschamber.com. Retrieved 14 February 2023.
  2. ^ Associates, Ashcroft & (24 September 2015). "Differences Between Nonprofit and Not For Profit". Ashcroft & Associates. Retrieved 14 February 2023.
  3. ^ Davis, Kylie. "Nonprofit vs. not-for-profit: How to tell them apart". Givebutter. Retrieved 14 February 2023.
  4. ^ Lake, Rebecca (8 February 2023). "Non-Profit vs. Not-for-Profit: What's the Difference?". smartasset. Retrieved 14 February 2023.
  5. ^ "Social Clubs | Internal Revenue Service". www.irs.gov. Retrieved 14 February 2023.