Nonprofit Organizations

Business With a Mission

NONPROFIT ORGANIZATIONS

WHAT ARE THEY?

• Nongovernmental Organization (NGO)

• Nonprofit Corporation

• Public Benefit Organization

• Nonprofit Organization (NPO)

• “Nonprofit”

The United Nations Department of Public Information defines the NGO as “a not-for profit, voluntary citizen’s group that is organized on a local, national or international level to address issues in support of the public good.”

Nonprofits include charities, research institutes, churches, community-based organizations, educational institutions, lobby groups, and professional associations. They are value-based organizations that generally depend on charitable donations and voluntary service.

COMMON MISCONCEPTIONS

Nonprofits in the US are all tax exempt [under section 501(c)(3) of the Internal Revenue Code].

Nonprofits cannot make a profit.

Nonprofits do not operate as businesses.

Nonprofits only use volunteer labor.

Nonprofits cannot lobby.

A nonprofit is owned by its founder or founders.

They can be tax exempt under other provisions or state-created.

Profits must go back into the organization.

They are businesses with an altruistic goal.

They can and do have paid employees.

They can lobby for causes but not for candidates.

It is owned by the “public.”

COMPARISON BETWEEN FOR-PROFIT AND NONPROFIT BUSINESS

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership

Profit and Assets

Control

Accountability

Compensation of Board

 Tax Exemption

Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Control

Accountability

Compensation of Board

 Tax Exemption

Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Goes to the owners Profit goes back into the organization; assets belong to the organization or are passed on to another nonprofit

Control

Accountability

Compensation of Board

 Tax Exemption

Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Goes to the owners Profit goes back into the organization; assets belong to the organization or are passed on to another nonprofit

Control Exercised by the owners Exercised by the board of directors

Accountability

Compensation of Board

 Tax Exemption

Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Goes to the owners Profit goes back into the organization; assets belong to the organization or are passed on to another nonprofit

Control Exercised by the owners Exercised by the board of directors

Accountability Accountable to the owners Accountable to the public (grantors, donors, stakeholders)

Compensation of Board

 Tax Exemption

Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Goes to the owners Profit goes back into the organization; assets belong to the organization or are passed on to another nonprofit

Control Exercised by the owners Exercised by the board of directors

Accountability Accountable to the owners Accountable to the public (grantors, donors, stakeholders)

Compensation of Board

Board members may be compensated Board members cannot be compensated

Tax Exemption Status

  For-Profit Business Nonprofit Business

Purpose To make a money (profit) To fulfill its mission for the public good

Ownership Individual, individual, or shareholders

Public

Profit and Assets

Goes to the owners Profit goes back into the organization; assets belong to the organization or are passed on to another nonprofit

Control Exercised by the owners Exercised by the board of directors

Accountability Accountable to the owners Accountable to the public (grantors, donors, stakeholders)

Compensation of Board

Board members may be compensated Board members cannot be compensated

Tax Exemption Status

Must pay income tax Usually exempt from paying income tax

motiveStart a nonprofit for the right reasons, not the wrong reasons.

You left a similar organization and you want to compete with them and you know you can do it.

You know there is a need for this service but you have not documented the need and do not know how to go about assessing and meeting the need.

You believe that the first thing you should do is create a web site about your ideas and your organization to start raising money .

You believe it is easy to operate, sustain, and maintain a nonprofit organization.

WRONG REASONS TO START A NONPROFIT

You believe it will be easy to raise money to accomplish your goals and objectives.

You and your family want to control the organization so that it will be run right.

You want to be the chief executive officer with a salary and sit on the board as chairperson.

You are aggressively going to seek grants because it must be easy.

You have found a grant that you want to apply for but you need a nonprofit organization behind you in order to apply for it.

Don Griesmann’s Nonprofit Blog, July 22, 2008

missionForm a clear and vital mission. It gives focus and direction to the organization.

A CLEAR AND VITAL MISSION IS THE RIGHT REASON TO START A NONPROFIT ORGANIZATION.

researchFind out everything possible about starting a nonprofit and pursuing its mission.

nonprofit formationFollow the legal steps to form a nonprofit.

accountabilityEstablish clear lines of accountability regarding handling of funds, finances, decision-making, reporting, and authority.

program & services

Develop high-quality program and services, which achieve the organization’s goals or mission.

fundingFind reliable and diverse sources of revenue.

leadershipEffective leadership is key to a successful nonprofit.

ENTREPRENEURIAL SPIRIT

“It takes a special kind of person to set an idea in motion, riding the highs and lows from humble beginnings to ultimate success…[it] is a gift that inspires others to become the best they can be.”

Source: “Spirit of the Entrepreneur” at entrepreneur.com

Passion

Creativity

Persistence

Vision

Collaborative Ability

Entrepreneurial Spirit

EFFECTIVE NONPROFIT LEADERSHIP

The nature of the nonprofit, its mission, is the expression of your voice and point of view. It is taking your ideas, your opinions, your passion - and putting them into action.

THE END