Another in a series of articles related to association management selected from our reading list by:
Robert O. Patterson, JD
CEO/ Principal
The Center for Association Resources, Inc.
About Non profit organizations and their management
As the name suggests, a non-profit organization is an association or a group established with the objectives of serving the people rather than profit motive. Non-profit organizations can be individuals, like self-help groups or formal associations. Voluntary organizations, philanthropic societies, social service associations and charitable trusts are some of the examples of non-profit organizations. Although most governments and government agencies also come under non-profit organizations, in most countries they are considered a separate type of organization and not counted as NPOs. In many counties, NPOs are exempt from income and property taxes.
In the United States alone, there are over one million large non-profitable organizations registered with the Internal Revenue Service. In addition, there are numerous smaller associations with annual revenues of less than $50,000 that are not registered with the IRS. The total revenues of non-profit bodies in US are estimated to be a little over 6 percent of the country’s economy. This sector employs around 10.2 million persons. Most non-profit entities are registered into corporations under the Corporation Laws of a particular State. Corporations are, in general, required to pay federal income taxes on their net earnings. However, Section 501 of the Internal Revenue Code details certain circumstances under which corporations or unincorporated non-profit organizations are exempt from these taxes. These include organizations established for charitable, religious, scientific or educational purposes, and those that do not distribute any part of their income among their members.
Tax exempt non-profit organizations operate like any other business units. They maintain bank accounts, own productive assets, receive donations, make investments and employ staff. The major difference is, however, in the nature of activities of NPOs. Non-profit organizations may be associations or trusts. The organization may be controlled by its members who elect the Board of Directors, Board of Governors or Board of trustees. Non-profit organizations or associations have excellent networking and organizing skills. These organizations render yeoman service to the society by providing material help and support in times of natural calamities, like floods, fire and earthquakes. In many countries, especially in developing countries, NPOs are the first ones to reach the affected areas. For example, when floods submerge several villages and people are marooned without food, drinking water and shelter, volunteers from NPOs drop the food packets and drinking water sachets from helicopters and wherever possible, they evacuate affected people to safer places. These non-profit organizations, in most cases supplement the work of Government agencies.
The Bill and Melinda Gates Foundation and the Howard Hughes Medical Institute are two of the wealthiest non-profit organizations in the United States. Outside the US, another large NPO is the British Wellcome Trust, a non-profit charitable trust. In addition, there are also millions of smaller NPOs that undertake social services and relief measures. Some non-profit organizations are particularly renowned for the charitable or social nature of their services carried out over a long period of time. These include, Amnesty International, Rotary International, Carnegie Corporation of New York, the Red Cross, UNESCO and IEEE. Many NPOs often use the .org or .us or .edu top-level-domain (TLD), when choosing a name for the domain to distinguish themselves from commercial entities, which use the .com space.
The Bill and Melinda Gates Foundation, The Howard Hughes Medical Institute, Section 501 of the Internal Revenue Code, NPOs, The Center for Association Resources
