Do you know what a nonprofit organization is? Before you think that it’s an organization that doesn’t make any profit, think again. It’s actually profit that enables this type of organization to survive. Below, you’ll find its key characteristics.
Purpose
To survive, the organization must ensure that there is a surplus of profit over the expenses. The term nonprofit is used because it refers to the nature of the organization that is not set up for earning revenue for personal interest but for the public benefit purposes. The money raked in by these organizations is used for the enhancement of public welfare through charitable activities and many others. For an organization to be nonprofit, no person must own shares of the corporation, the property and income of the organization should never be distributed to owners but are given to the public benefit mission and activities.
Ownership
As mentioned earlier, no person should own the organization. In essence, it belongs to the public. This means that the assets of the organization are for the charitable, educational, scientific, literary or religious purposes. Any cash, equipment, or property of the organization cannot be given to any person even if he/she is a member of the organization. These things cannot also be used for a person’s private benefit. They should only be used for fair market compensation of the nonprofit organization.
Control
A governing board of trustees or directors exercise control over the organization. This means that the board is responsible for overseeing everything that the organization does. It is also in charge of ensuring that the organization is able to fulfill its purpose.
Accountability
Since these organizations are accountable to the public, they must file annual information returns with both the federal and state governments. The organization must give full report of its finances including the salaries of its highest paid non-officer employees. The form given to the IRS must be available for public viewing.
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