Nonprofit organizations are organizations formed for social purposes other than making profit. They are formed to promote the welfare of the society. The excess fund or profit gained from the activities is not distributed to its members but retained by the organization for future activities. The sources of capital of these organizations are mainly donations from the society, contribution from the members, from the government, from donors and from religious organization among other groups. After performing the activity, it can be dissolved or mandated to carry other activities in the society.
The main character of a nonprofit organization is that it’s only formed to do certain activities otherwise the organizational structure is the same as that of the profit making one. A number of examples of these organizations include; churches, government agencies, public hospitals, public schools, charitable and aid organizations, research institutes and labor unions. The other difference between these organizations and profit making ones is that these organizations are not under any obligation to pay taxes.
Since the main aim is to promote the welfare of the society and to carry certain social activities, they are not gaining profits. So many governments feel obliged not to tax them but to encourage them to participate in the welfare of the citizens. However, in recent times there are some debates on whether these organizations should pay taxes as some are seen making a lot of profit from the activities they undertake in the society.
Before forming a nonprofit organization, one should ask him/her herself the purpose of the organization. There should be a clear objective as to why the organization is being formed. This will help to make a structure that will be very helpful during registration. The other aspect to be considered is the location in which the organization will base its activities.
If the objective is eradicating poverty, one may consider basing the organization in an area stricken by the vice. A thorough study should be done for the organization to achieve its objective. Various machinery should be put in place to run the organization smoothly. The other key consideration to look at is the source of fund and man power. For a nonprofit profit organization to run well, it should have sustainable funds.
Human resource is another consideration to look at as many non profits making organization have failed totally due to mismanagement. Although the organizations are not meant to make profit, they should be run by professionals for good governance.