Third and Fourth Sectors

The People Pages: Nonprofit Basics

from The People Pages: Resources for Social Change (c) 2003 The Fruition Coalition

Nonprofit organizations (are) …

  1. Usually formed by a group of people organized to solve a problem or fill a need
  2. Benefit the public at large or its members
  3. Business entities that are usually incorporated in their state of origin
  4. Not owned by founders or investors and therefore excess earnings are not distributed in the form of dividends
  5. Allowed to have a surplus at the end of the year
  6. Reinvest excess income into programs and services
  7. Assigned a tax code by the IRS; charitable organizations are known as 501(c)3 organizations
  8. Exempt from paying federal income tax
  9. Exempt from paying state sales tax
  10. Able to sell products and charge participants for services
  11. May be subject to Unrelated Business Income Tax
  12. Either public charities supported broadly by the community or private foundations supported by one person or a cohesive group
  13. May or may not have members who elect officers
  14. Governed by a volunteer board of directors
  15. Usually able to accept charitable donations for which the donor can take a tax deduction
  16. Just as complex and challenging to manage as for-profit organizations
  17. Responsible for and accountable to the community served
  18. Staffed by professionally competent people
  19. Supported by volunteers who perform a variety of tasks
  20. Expected to operate efficiently and effectively ‘like a business’

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