A common belief of nonprofit is that they’re handled by volunteers. This isn’t true at all. Most nonprofits have people working for the company. They would then attract volunteers to do the work led by the staff. The money to pay staff originates from the state law that allows most nonprofits to pay reasonable wages to their workers. NPO’s should be careful that their staff isn’t making too much money. If that’s the case, the IRS has the right to penalize them. The range to which a nonprofit organization is considered business-like is something organizations has to balance. This comes in handy in how they achieve their aims and manage their assets.
Even if the aim of nonprofits isn’t to make a profit, they should still operate as a business. They have the responsibility of focusing on being financially responsible, replacing profit-motive and self-interest with mission-motive. They also have the ability to speak both dialects of nonprofit organizations: nonprofit and business languages. The business language offers the ability to work with money. This includes applying for grants, which is important for nonprofits, whereas the nonprofit dialect offers the capacity to speak to the community.
Nonprofits need to balance both aspects to have a successful organization.
NPOs have a wide variation of goals and foundations. For legal classification, there are some elements of importance:
- Tax status of the founders
- Tax statuses of private and corporate donors
- Provisions for the dissolution of the organization
- Provisory for the amendment of articles or statuses of incorporation
- Auditing and accountability provisions
- Management provisions
Some of these elements should be stated in the organization’s agreement of establishment or constitution. Others may be offered by the supervising authority at each jurisdiction. While an affiliation will not affect a legal status, they may be taken into account by legal proceedings as an indication of purpose. Most states have laws that govern the establishment and supervision of NPOs. That requires compliance with corporate governance standards. Most organizations are asked to publish their financial reports defining their expenditures and incomes publicly. In most elements, they’re similar to corporate business organizations though there are certain differences. Both for-profit and not-for-profit organizations should have a trustee who owes the organization the duty of trust and loyalty, steering committee members, and board directors.
Formations and Structures.
In the US, nonprofit organizations are created by filing articles or bylaws of incorporation or both in the area in which they expect to operate. The act of incorporation creates a legal entity, enabling the company to be treated as a distinct team by law. This also includes them to enter into business negotiations, own properties, and form contracts as for-profits companies can.
Nonprofits can have members, but many don’t. The nonprofit may also be an association of members. The organization can be managed by its members who elect the board of directors, trustees, or governors. Nonprofits may have a structure to allow for the representation of the corporation or team as members. Otherwise, it may be a non-membership organization. The board of directors may elect its successors. Contact Hunter Perret for an in-depth discussion about this!