A Critical Overview of Non-Profit Organizations Part 1

Establishments that serve public interests are called Non-Profit Organizations; this type of corporation does not pay tax.  Such organizations focus on achieving different goals such as charity, research, religious or civil rights. The information on this website aligns towards non-profit activities. Donations made to such organizations by the public is deductible from taxes payable to the federal government.

In legal terms, nonprofit organizations use surplus funds after operational expenses to promote their cause. As such, they are not under the obligation to declare profits. Registration with the government is not compulsory for these types of organizations. However, a nonprofit that is not registered cannot access the privilege of tax exemption from the Internal Revenue Service. Besides the non-existence of shareholders, a registered nonprofit is quite similar to a for-profit organization.

At inception, a nonprofit organization is legally required to file articles of incorporation with the state where the corporation is located or where it intends to carry out its activities.  This procedure is the same with for-profit organizations. Although the requirements do differ from one state to another, most countries demand the constitution of a board of directors, officers of the corporation, by-laws and annual meetings. In many countries, it is compulsory to register with the state charity board or a parallel agency and adhere to specific requirements such as the filing of reports regarding fundraising activities.
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The designation of tax-exempt status to a nonprofit organization means that the organization is not under obligation to pay federal government income tax. Although most states and local authorities also give similar exemption from paying various taxes, it is not a rule of thumb because laws differ from one state to another. However, nonprofits do benefit from lower postal rates.