What Is a Non-Profit Organization?

August 8, 2014, Mountain Kilolo-Kilolo-Tanzania-Africa-An unidentified female doctor while talking to a group of unidentified African children in the area of Kilolo where medical care arriving only through volunteering of international NGOs It’s a term you will hear tossed around a lot when an organization is trying to raise money, but most consumers aren’t even sure what it means. Non-profit organizations have certain requirements they must meet to be categorized as such and are subject to different rules and regulations to keep their status. To help you understand where you are donating your money and time when you volunteer for or donate to a fundraiser, we’ve broken down exactly what it means to be a non-profit organization.

The Types of Non-Profits

The IRS recognizes 26 different types of non-profit organizations. These are organizations that serve public interest that are exempt from most taxes. These groups often work to raise money and awareness for specific causes. To qualify as a non-profit, the group must have fit into one of the following categories: religious, literary, educational, scientific or charitable. When a consumer donates to a non-profit organization like these, they can deduct the donation when they file their taxes each year.

Under the legal definition, a non-profit must use all revenue above normal operating costs to serve the public. As the name suggests, the organization can’t be designed to make a profit, but rather to turn revenue back into additional education for the community. Unincorporated non-profits are not given tax exempt status, and incorporated non-profits are like for profit entities except they don’t have shareholders.

The most common types of non-profits in order in America are:

  • Human Services
  • Education
  • Health
  • Public and Societal Benefit
  • Arts, Culture and Humanities
  • Religion Related
  • Environment and Animals
  • International and Foreign Affairs

These groups can either be private foundations or public charities. Both hire staff to run the organization and use the services of volunteers to run their operations. Staff salaries may be on par with many for-profit organizations, the difference is that anything above and beyond the operating costs are re-invested in the foundation.

Non-Profit Organizations You May Recognize

To put the idea into perspective and give real-life examples, consider some of the more common non-profit organizations you may have heard of, and what they do.

Many schools and school districts are non-profit organizations that parents and community members can donate to and benefit from a tax deduction. To determine if an organization you are working with is truly a non-profit, you can search through the IRS charity list or ask a volunteer or staff member for a 501(c)(3) number.

Making Giving Easy

At Elefundo, we want to help all non-profits succeed in their efforts to improve communities and the lives of those who live in them. That’s why we offer a variety of fundraising options to help local schools and other groups to raise money without all the work. Contact us today to learn more.