A nonprofit organization (NPO), also known as a non-business entity,

8 min readAug 2, 2021

A nonprofit organization (NPO), also known as a non-business entity,[1] not-for-profit organization,[2] or nonprofit institution,[3] is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization’s purpose, not taken by private parties. A wide array of organizations are nonprofit, including most political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities generally seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without securing tax-exempt status.

The key aspects of nonprofits are accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Nonprofit organizations are accountable to the donors, founders, volunteers, program recipients, and the public community. For a nonprofit that seeks to finance its operations through donations, public confidence is a factor in the amount of money that a nonprofit organization is able to raise. The more nonprofits focus on their mission, the more public confidence they will have. This will result in more money for the organization.[1] The activities a nonprofit is partaking in can help build the public’s confidence in nonprofits, as well as how ethical the standards and practices are.

Statistics in the United States[edit]

According to the National Center for Charitable Statistics (NCCS), there are more than 1.5 million nonprofit organizations registered in the United States, including public charities, private foundations, and other nonprofit organizations. Private charitable contributions increased for the fourth consecutive year in 2017 (since 2014), at an estimated $410.02 billion. Out of these contributions, religious organizations received 30.9%, education organizations received 14.3%, and human services organizations received 12.1%.[4] Between September 2010 and September 2014, approximately 25.3% of Americans over the age of 16 volunteered for a nonprofit.[5]

Mechanism of money-raising[edit]

Nonprofits are not driven by generating profit, but they must bring in enough income to pursue their social goals. Nonprofits are able to raise money in different ways. This includes income from donations from individual donors or foundations; sponsorship from corporations; government funding; programs, services or merchandise sales; and investments.[6] Each NPO is unique in which source of income works best for them. With an increase in NPO’s within the last decade, organizations have adopted competitive advantages to create revenue for themselves to remain financially stable. Donations from private individuals or organizations can change each year and government grants have diminished. With changes in funding from year to year, many nonprofit organizations have been moving toward increasing the diversity of their funding sources. For example, many nonprofits that have relied on government grants have started fundraising efforts to appeal to individual donors.

A nonprofit organization (NPO), also known as a non-business entity,

Contents

Statistics in the United States[edit]

Mechanism of money-raising[edit]

Written by Riyepix