Nonprofit organization

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Nonprofit regulation

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A nonprofit organization (NPO) is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. States in the United States defer to the Internal Revenue Service (IRS) designation conferred under United States Internal Revenue Code Section 501(c), when the IRS deems an organization eligible.[1]

While not-for-profit organizations are permitted to generate surplus revenues, those revenues must be retained by the organization for its self-preservation, expansion, or plans.[2] NPOs have controlling members or boards. Many have paid staff including management, while others employ unpaid volunteers and even executives who work with or without compensation (occasionally nominal).[3] Where there is a token fee, in general, it is used to meet legal requirements for establishing a contract between the executive and the organization.

Designation as a nonprofit and an intent to make money are not related in the United States. This means nothing can be conferred by the declaration. It is unclear whether or not this holds outside of the United States. In the United States, such inference is the purpose of the Internal Revenue Code, Section 501(c). The extent to which an NPO can generate surplus revenues may be constrained or use of surplus revenues may be restricted.

Nature and goals

Some NPOs may also be a charity or service organization; they may be organized as a not-for-profit corporation or as a trust, a cooperative, or they exist informally. A very similar type of organization termed a supporting organization operates like a foundation, but they are more complicated to administer, hold more favorable tax status and are restricted in the public charities they support.

See also

Ballotpedia:Index of Terms

External links

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Additional reading


  1. The Nonprofit Handbook: Everything You Need to Know to Start and Run Your Nonprofit Organization (Paperback), Gary M. Grobman, White Hat Communications, 2008.
  2. "Publication 4220 (Rev. 8-2009)" (PDF). Retrieved on 31 July 2010. 
  3. Drucker, Peter (1989). "What Business Can Learn from Nonprofits." Harvard Business Review: 1-7.