Nonprofit agency

Nonprofit Agency

A nonprofit agency, also known as a nonprofit organization (NPO), is a type of business entity that uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization's directors (or equivalents) as profit or dividends. This is known as the non-distribution constraint. The decision to adopt a nonprofit legal structure is one that will often have taxation implications, particularly where the nonprofit seeks income tax exemption, charitable status and so on.

History

The earliest nonprofit organizations were often established for religious or charitable purposes. This tradition of philanthropy continued into the modern era, with the establishment of charitable organizations such as the Red Cross and United Way.

Legal and tax status

In many countries, nonprofits may apply for tax exempt status, allowing them to not pay income tax on certain parts of their income, depending on the laws of the particular jurisdiction. In the United States, to be exempt from federal income taxes, nonprofits must meet certain rules. One of the most important aspects of a nonprofit organization is that it has no owners. The board of directors has legal control and responsibility, but no ownership rights.

Types of Nonprofit Agencies

There are many types of nonprofit agencies, including charitable organizations, trade unions, and public arts organizations. Some nonprofit agencies are also classified as non-governmental organizations (NGOs).

Funding

Nonprofit agencies rely on a variety of sources for funding, including donations from individuals, grants from government agencies, and income from programs or services.

Governance

Nonprofit agencies are typically governed by a board of directors or trustees. The board is responsible for the overall direction of the organization, and for ensuring that it fulfills its mission.

Challenges

Nonprofit agencies face a number of challenges, including fundraising, maintaining donor relationships, and managing resources effectively. They also face regulatory and legal challenges, as they must comply with the laws and regulations of their respective countries.

See also

• Charitable organization
• Non-governmental organization
• Social enterprise
• Voluntary sector