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How Do Nonprofit Organizations Work?

Nonprofit organization work differently than other businesses.

Nonprofit organizations work around the world to accomplish philanthropic missions and provide services for people in need. Nonprofits organizations appear similar to their for-profit counterparts in a number of ways, but there are distinct differences beneath the surface. Learning how nonprofit organizations work can help you to understand the fundraising, marketing and service activities these corporate forces for good employ.

The Facts

The incorporation process for nonprofits differs from for-profit companies. Nonprofits also qualify for tax exemption under section 501(c)(3) of the IRS tax code, while for-profit business income is always taxed. The makeup of nonprofit workforces differs from other companies as well. Nonprofits generally employ a core group of salaried employees as well as a large pool of volunteers.

Significance

Aside from the way in which they are formed, the most fundamental difference between nonprofits and for-profits is their reason for being. Nonprofit organizations exist to serve a humanitarian or environmental need, and all of their inner workings are geared toward this goal, affecting the way the organization raises money, employs its workforce and invests its income.

Fundraising

Nonprofits obtain the lion's share of their income from donations and grants. Donations come from individuals, groups, trust funds and other organizations. Grants are awarded by organizations that exist to help fund other charities. Nonprofits engage in a range of fundraising activities, including mail campaigns, email marketing and benefit events to gain new donors. Organizations must submit formal grant proposals to grant-awarding organizations and compete against other proposals for the award.

Programs And Services

The programs and services of a nonprofit organization are designed to meet an unmet need. Services are often designed to meet a human need, such as providing food and shelter to the homeless. Services can also be designed to help animals by, for example, rescuing abused dogs or saving an endangered species. Organizations can also help to protect the environment by, for example, lobbying for environmental legislation.

Considerations

Modern, innovative nonprofits break out of the traditional nonprofit mold to incorporate profitable components into their business models. Television churches that sell DVD's, for example, or humanitarian groups that sell clothing made overseas, can bring in more reliable income by offering products that are valuable to consumers, rather than relying solely on grants and gifts. This trend is changing the way that nonprofits work around the world.


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Article Written By David Ingram

David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.