Non-profit Organizations are groups that are operated for a public or mutual benefit rather than generating profits for their owners or shareholders. They are organized for a variety of reasons, from informal neighborhood associations, soup kitchens and local churches to labor unions, social welfare societies and museums to large universities and hospitals. However, despite differences in size and structure, nonprofits have five common characteristics: they are organized, private (separate from government), self-governing, non-profit distributing and voluntary. They may be registered as endowments, foundations, individual enterprises, trusts or some other legal entity as specified by state law.

Although they are not required to pay taxes, nonprofits must disclose financial and operating information to encourage donors to feel confident that their contributions are being spent effectively and fairly. This transparency in turn helps to create a sense of public responsibility that a nonprofit is accountable to its members, volunteers, founders and the community in general.

While some nonprofit organizations are largely volunteer-based, others are staffed with paid full and part-time employees, managers and directors. While there are advantages to this model, it is important to remember that even nonprofits with employee salaries must pay employment taxes and abide by workplace rules and regulations, just as for-profit businesses do. In addition, it is not uncommon for a nonprofit to hire consultants and other contractors to perform essential services that would be difficult or impossible for the organization to do itself.

In order to be tax-exempt, nonprofits must file for this status with the Internal Revenue Service and meet specific requirements set forth by the IRS code. The most common nonprofit types are those that operate under section 501(c)(3), which include corporations, funds and foundations that are operated exclusively for charitable, religious, scientific, educational, literary or public safety purposes. Those that operate under other sections, such as 501(c)(7) – sports clubs and recreational associations, and 501(c)(4) – business leagues and trade associations, must further define their mission or area of activity in order to qualify for tax-exempt status.

Some of the most famous nonprofits include Amnesty International, which prevents human rights abuses; The Bill and Melinda Gates Foundation, which enhances global healthcare and promotes education; and UNICEF, which provides emergency relief to children worldwide. These and many other nonprofits play a vital role in the social fabric of our world, and they can only do so with the help of volunteers and the generosity of donors.

While the motivations for founding a nonprofit may differ, they all share a similar desire to serve a greater good in the community. In the past, federal governments often supported the creation of these services and programs through grants or funding. However, the twentieth century saw two major shifts that significantly reduced this role: a change in policy under President Lyndon Johnson’s “Great Society” legislation and a sharp decrease in government support during the Reagan administration. As a result, nonprofit organizations have had to step up fundraising efforts and become more accountable for their finances and operations.