Nonprofit Corporation: Good Structure for Civic Groups

The nonprofit corporation (NPO) or not-for-profit corporation is formed by civic, educational, charitable and religious organizations. Through this structures, these groups enjoy a nonprofit tax status and limited liability. These business structures are managed by boards of directors or trustees. If the corporation is ever dissolved, assets from the corporation must be transferred to another nonprofit.

When an NPO manages to have excess funds, these funds are retained to help it survive or accomplish particular goals. These funds cannot be distributed in the form of profits. The NPO is controlled by a board of directors. Many NPOs have paid staff, others are run by volunteers.

Just because an organization is designated an NPO, it does not mean that it cannot make a profit. For example, some local, small NPO’s might make a rather handsome profit from a golf outing for which participants will pay hundreds of dollars to attend, but knowing that all of the money will flow to the NPO to do good. The NPO has no owners who can profit from an excess funds.

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