The 411 on Nonprofit Organizations

  
     
May 05, 2017

 

Nonprofit Organization. It’s a phrase that we come across frequently, but what does it really mean? There’s a lot of confusion surrounding just what an NPO is, what they do, and just what makes an NPO… well, an NPO! Let’s discuss that, shall we? 

 

So what does it take to legally be considered an NPO? According to governmental standards, an NPO must be organized as a trust, corporation, or association. They can be a public or private entity, depending on if they get the money to run the organization from public or private sources. There are plenty of institutions under this category: Public schools, public clinics and hospitals, churches, labor unions, and so many more. 

The organization must also have an exempt purpose; the IRS gives the following examples of exempt purposes:

Charitable, religious, educational ,scientific, literary testing, for public safety, fostering national/international amateur sports competition, and preventing cruelty to children or animals.

 

There are plenty of other qualifications for an organization to be considered an NPO and gain tax-exemption. The organization must have existed for at least three tax years, and they cannot benefit “any private shareholder or individual.” NPO’s are also limited in their ability to influence politics, whether regarding policies or the election of political officials. And of course, as with anything that goes through the government, all organizations that want to become an official nonprofit must complete the application process.

 

In general, NPO’s can specialize in any number of things, most of which go along with the exempt purposes previously mentioned. When people think of a nonprofit, they’re usually thinking about them from the perspective or charitable, religious, or social welfare organizations. But nonprofits can also include labor organizations, agricultural organizations, business leagues, and veterans organizations, along with less-common specializations.

 

It might be easy to assume that all companies that do good are nonprofits, but interestingly enough that’s not always the case. There are plenty of other classifications that they can fall under, one of which is B-Corporations. A B-Corp is a for-profit company that’s been certified by B Lab, which is an organization similar to the BBB. An NPO itself, B Lab focuses on building a global community of certified corporations that have have to meet standards of “social and environmental performance, accountability, and transparency” according to the community of Certified B Corporations. Unlike a nonprofit, B-Corps are taxed like regular corporations, but they put a greater focus on operating businesses in an eco-friendly, sustainable way.

 

BBB is a Nonprofit Organization that actively works to help local businesses, consumers, and marketplaces to better themselves. BBB's Give.org has local charity listings and reports, just like BBB.org has a directory for local businesses. If you're planning to donate money or material goods, make sure that you're giving to a reputable organization that uses donations for their intended purpose.