What is the difference between a non -profit and non -profit organization?
Legally, the concepts of non -profit and non -profit are interchangeable in most places. Nevertheless, each term is usually associated with certain types of activities-generally non-profit organizations serve a relatively small group that focuses on a hobby or sport. Non -profit organizations usually focus on larger social or political issues, are more well organized and often act as legal entities with a charter and/or the management board that officially represents the group. In some countries, as well as the US, the non -profit organization may qualify for tax -exempt status, while the non -profit organization does not have to.
Similarities
Although non -profit and non -profit organizations can earn money, all profits are returned to the organization to be in operation or otherwise support the mission of the organization. Neither type of organization pays shareholders such as a profitable company, and is often employed by volunteers. In addition in the US, both can be integrated in the state level that provides people who runLegal and financial protection of the organization. Sometimes the difference between a non -profit and non -profit organization comes to semantics, and the organization prefers to be called "non -profit" to emphasize that any money earned is directly to his thing. The term "non -profit" could be assumed that the organization does not gain at all, rather than these profits are used.
distinctions
The laws on non -profit organizations and non -profit organizations vary between jurisdictions and countries, so an organization that could be considered a non -profit organization in one region can be considered something else in the other. In addition, the non -profit organization can be referred to as "non -profit" for accounting purposes that distinguish it from "profitable" business. Generally speaking, the organization is considered a non -profit organization if it meets the following Criteria:
- has a charter,
- is organized PRO some purpose that serves or improves the community,
- and will not pay dividends to shareholders.
In most cases, non -profit organizations are smaller and are based on specific activities or hobbies. Often they do not have charters or formal Board.
IRS instructions
IRS has set instructions for categorizing organizations exempt, non -profit and non -profit organizations in the US. The term 'non -profit' is mentioned primarily in connection with the deduction of losses or expenditure and focuses on activities such as hobbies, sport or other recreation, which is carried out without the intention of making money. Any activity that brought more money than it is in three of the previous five tax years is usually considered to be a "profit". For example, a knitting club could be considered non -profit if any money earned from fees or sales of knitted products was returned to the club to buy inventory, pay for renting space for club meetings or other expenses to be KLUB active. In particular, IRS states that organizations set up to support a group of people who practice the same hobby do not qualify themselves as "business leagues" and therefore cannot obtain the status exempt from tax.
On the other hand, the non -profit organization can be organized as a company and is usually expected to gain profit. However, this profit cannot be used for the direct benefit of one or more members of the organization; Must go directly to support the mission of the organization. IRS groups non -profit organizations with charity organizations, religious organizations and private foundations according to IRC section 501 (a). C) 3-6 and with political organizations in part 527 as groups that may be considered exempt from tax if they meet certain criteria. For example, a knitting guild, which is set up to educate the public about knitting and promotes the interests of enterprises within the Knitting industry, can be considered a non -profit organization.