What is a Non-Profit Corporation?

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You’ve likely heard of the term “non-profit corporation” before, but do you know what exactly this means? What differentiates a non-profit business from any other business operation out there? Here’s the scoop on this subject of popular interest today.

Profit VS. Non-Profit

To best illustrate what a non-profit is, we can look to and compare it with a for-profit corporation. In a for-profit corporation, financial gain is the primary objective. The company is then subjected to the regularly affiliated taxes for this activity and continues to operate in the same, money-motivated manner indefinitely.

In a non-profit endeavor, financial gain is not the primary motive for day-to-day operations, but rather, a social cause or societal reason. Entrepreneur’s Small Business Encyclopedia describes such an entity as “a business organization that serves some public purpose and therefore enjoys special treatment under the law. According to Entrepreneur, a Nonprofit corporations, contrary to their name, can make a profit but can’t be designed primarily for profit-making.” In this setting, any time that there is a profit after all costs have been accounted for, that profit is then directly invested back into the needs of the company.

IRS Implications

One of the most important ways in which a non-profit is identified and categorized, legally and in a business function, is the way in which the IRS recognizes it. When such an entity first starts up, they must apply directly to the IRS for such identification, and the ability to claim tax-exempt status. The IRS then categorizes the venture under one of its tax-exempt tax codes such as educational, scientific, or charitable body. This is the key to being identified and recognized as a non-profit of any type. Without the blessing of the IRS, such status is not possible, and the business entity is then considered to be a for-profit for all intents and purposes.

Real-Life Examples

There are plenty of not-for-profit corporations in real-life that you may have heard of before. As mentioned above, these have all successfully applied for and maintained a non-profit designation from the IRS. Do you recognize any of these three?

Make-A-Wish Foundation

The Make-A-Wish Foundation is a non-profit that specifically works to provide extremely ill and disadvantaged children with rare and exciting, once-in-a-lifetime opportunities. Perhaps the child wants to meet a celebrity or go visit an otherwise, impossible destination. This foundation works to grant those wishes and expose a plight of suffering to a rare and resounding slice of joy.

Mozilla Foundation

Mozilla, the parent corporation of the internet browser Firefox, has long maintained its affiliated charitable foundation. The Mozilla Foundation has specifically worked to lend a hand in important societal issues regarding internet access, technology, and privacy. As a result of its non-profiting, philanthropic efforts here, it remains a well-known and valuable public endeavor to this day.

The Coca-Cola Foundation

The  Coca-Cole Foundation registered charitable organization has single-handedly reinvested nearly $1-billion dollars into local community projects since its 1984 inception. Each year, different target communities and projects are headed by the foundation, and as a result, people all over the world have directly benefitted over the years. Projects have included education, infrastructure, general aid, and more.

Related Resource: How Do Small Business Owners Make Their Money?

Non-profit corporations truly do help out the people and communities that they give back to. As a result, the IRS identifies them as such philanthropic sources, and they are handled with a little more care and compassion than an otherwise, for-profit entity would be. These are the basics of the non-profit corporation today as well as the important IRS categorization necessary to them all.

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