Not-for-profit organization

A not-for-profit organisation (NFPO) is a legal entity that does not share extra money with its members. It is created to achieve special goals, like helping a community or supporting a cause.

Although not-for-profit organizations and nonprofit organizations (NPO) are different in law, people sometimes use the words as if they mean the same thing. Not-for-profit organisations are not made just to help the public, like nonprofit organisations must be. Instead, not-for-profit organisations are called “recreational organisations” because they do not try to make money, unlike nonprofit organisations.

Not-for-profit organisations are special because they focus on their goals instead of making profits.

Functions

A not-for-profit organization (NFPO) does not have to serve the public good like some other organizations. Instead, it serves its members and does not aim to make money. For example, a sports club is a good example of an NFPO because it exists for the fun of its members, and any money made goes back into improving the club.

In the United States, these organizations often ask to be tax-exempt under a special rule called section 501(c)(7) of the Internal Revenue Code. Common types of NFPOs include charities, sports clubs, foundations, private schools, universities, museums, churches, and social welfare organizations. For charities, any money they earn from donations, fundraising, or other activities should be used to support their cause, not given to members as profit.