Not_for_profit
Not-for-profit organization
Legal entity that retains surplus funds
A not-for-profit or non-for-profit organization (NFPO) is a legal entity that does not distribute surplus funds to its members and is formed to fulfill specific objectives.[1] An NFPO does not earn profit for its owners, as any revenue generated by its activities must be put back into the organization.[2]
The examples and perspective in this article may not represent a worldwide view of the subject. (November 2023) |
While not-for-profit organizations and non-profit organizations (NPO) are distinct legal entities, the terms are sometimes used interchangeably.[3] An example of this is a sports club, which exists for the enjoyment of its members and thus would function well as an NFPO, with revenue being re-invested into improving the organization.[1]
These organizations typically file for tax exemption in the United States under section 501(c)(7) of the Internal Revenue Code as social clubs.[4] Common ventures for which NFPOs are established include:
- Charities
- Sports clubs
- Foundations
- Private schools
- Universities
- Museums
- Churches
- Social welfare organizations
Charities, as NFPOs, function under the premise that any revenue generated should be used to further their charitable missions rather than distribute profits among members. This revenue might come from donations, fundraising, or other activities undertaken to support their charitable cause.