A non-profit organization, also known as an NPO, is an entity that funnels any surplus funds back into the operation of the organization, rather than distributing that surplus to owners or investors. The focus of a not for profit entity is to provide services to one or more sectors of the populace, rather than to generate wealth. There are a number of different types of operations that are classified as non-profit organizations, including charities, religious organizations, trade unions, and associations that provide support to individuals suffering with different types of diseases.
In many nations around the world, non-profit entities enjoy exemption from income and property taxes. The idea behind this approach is that since organizations of this type are focused on offering services and not on earning profits, the exemptions allow them to direct more of their available income directly into providing those services. Generally, that income is generated by donations from supporters who believe in the cause that is the central focus of the non-profit. Depending on local laws, some NPOs are allowed to open interest-bearing accounts or establish investment accounts that also help to generate revenue that is pumped back into the operation.
The identifying characteristic of the non-profit organization is that any earnings generated in support of the organization can be used to benefit anyone connected to the organization. This does not mean that employees do not receive salaries or wages, or cannot have benefit packages that include healthcare and similar benefits. It does mean that any funds not needed to cover the basic day to day operations of the organization are used to preserve and expand the non-profit itself, rather than being distributed to stakeholders and employees.
In order to keep operational costs as low as possible, while still providing viable services to the community, a non-profit will often operate with a core group of employees, including an executive director. To augment the efforts of this core group, the organization will depend on the support of volunteers who help with tasks such as planning and executing fund raising activities, helping with clerical tasks, or taking the services offered by the organization to its targeted audience.
A non-profit may be structured in several different ways. Some are set up as charities or similar types of service organizations. The organization can also be structured as a foundation, a trust, or a cooperative. In many cases, the decision of how to set up a non-profit has to do with the goals of the organization, local laws that govern the establishment and operation of non-profits within the area, and the types of resources that are available to further the work of the organization.
