Nonprofit Organizations
A nonprofit organization (NPO) is an organization that uses surplus revenues to achieve its goals rather than to distribute them as profit or dividends. While not-for-profit organizations are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or for other plans. NPOs have controlling members or boards. Many have paid staff, including management, while others employ unpaid volunteers and even executives who work with or without compensation (occasionally nominal). Where there is a token fee, in general, it is used to meet legal requirements for establishing a contract between the executive and the organization. The extent to which an NPO can generate surplus revenues may be constrained, or use of surplus revenues may be restricted.
The two major types of nonprofit organizations are membership and board-only. A membership organization elects the board and has regular meetings and power to amend the bylaws. A board-only organization typically has a self-selected board, and a membership whose powers are limited to those delegated to it by the board. A board-only organization's bylaws may even state that the organization does not have any membership, although the organization's literature may refer to its donors as members; examples of such organizations are Fairvote and the National Organization for the Reform of Marijuana Laws.
Nature and Goals
Some NPOs may also be a charity or service organization; they may be organized as a not-for-profit corporation or as a trust, a cooperative, or they exist informally. A very similar type of organization termed a supporting organization operates like a foundation, but they are more complicated to administer, hold a more favorable tax status, and are restricted in the public charities they support.
Legal Aspects
NPOs have a wide diversity of structures and purposes. For legal classification, there are some elements of importance:
- Economic activity,
- Supervision and management provisions,
- Representation,
- Accountability and auditing provisions,
- Provisions for the amendment of the statutes or articles of incorporation,
- Provisions for the dissolution of the entity,
- Tax status of corporate and private donors,
- Tax status of the foundation.
Some of the above must be, in most jurisdictions, expressed in the charter of establishment. Others may be provided by the supervising authority at each particular jurisdiction.
While affiliations will not affect a legal status, they may be taken into consideration by legal proceedings as an indication of purpose.
Most countries have laws which regulate the establishment and management of NPOs and require compliance with corporate governance regimes. Most larger organizations are required to publish their financial reports detailing their income and expenditure publicly. In many aspects, they are similar to corporate business entities though there are often significant differences. Both not-for-profit and for-profit corporate entities must have board members, steering committee members, or trustees who owe the organization a fiduciary duty of loyalty and trust. A notable exception to this involves churches, which are often not required to disclose finances to anyone, including church members.
American Cancer Society Offices in Washington D.C.
The American Cancer Society (ACS) is a nationwide voluntary health organization dedicated to eliminating cancer.