Let's get right to it!
When stripped back, a not-for-profit organisation (NFP), also sometimes referred to as a non-profit organisation or even a 'for purpose' organisation, is an organisation that has two key characteristics:
By way of contrast, a for-profit venture is generally established with profit as its primary focus and may distribute profit to its shareholders, usually through the payment of dividends.
A not-for-profit organisation can be incorporated or unincorporated, big or small, may have employees and may be, but does not need to be, charitable in the legal sense.
One of the more common misconceptions is that by being not-for-profit, an organization is automatically a charity or somehow exempt from income tax.
Not true. Which is why it is a misconception, right?
To be exempt from income tax you need to be either a registered charity (we have an article on this coming soon!) or a type of not-for-profit that is permitted to self-assess as income tax exempt.
Other characteristics of a not-for-profit organisation are:
The structure and type of not-for-profit organisations and the scope and nature of their purposes and activities are extremely diverse and include:
And that's about it really. There's not too much more to it.
To learn more about what makes a not-for-profit a charity, please keep an eye out for our article on registering a charity.
You can find out more about Darren Fittler here.