Non Profit Organizations

Non Profit Organizations

Non-Profit Organization – economic institution that operates like a business but
does not seek financial gain. Examples are schools, churches, and
community service organizations. Non-profit organizations often
provide goods and services to consumers while they pursue other
rewards such as improving educational standards, seeing the sick
become well, and helping those in need. Many are legally
incorporated to take advantage of the unlimited life feature such as
private welfare groups, adoption agencies, and youth or civic

Non Profits organizations are generally those
business organizations that exist to serve some public need without
the intent of making a profit. There is a long history of service to
consumers as well as producers in the the American workplace. The
actions of non profit organizations, while often unnoticed, are quite

Some economics students have noticed the
different uses of the term non profit and not for profit and have
inquired into the differences between the two. In recent discussions
in one class we defined non profit as business organizations designed
to perform a service for others and not for profit as charitable
organizations. While this delineation does exist the terms used are
wrong. There is, in reality, no difference between the two terms.
Legal statutes even refer to the two terms as being synonymous. But
the *practical* legal definition (as established by the wise and
beneficial people at the IRS) does make a distinction.

  • “Not-for-profit” refers to an activity, for
    example, a hobby (like fishing).

  • “Nonprofit” refers to an organization
    established for purposes other than profit-making. Note here that
    nonprofit does not necessarily mean “charitable.”

For example, a “nonprofit” organization can be
an association of people who like fishing (though the activity does
not have to be not-for-profit).

In the end, both terms are frequently used and
frequently seen. There is no firmly established distinction, though
some people have strong preferences between them.

The federal government has distinguished
between the different types of non profit organizations based upon
their tax code designations. The list below cites the type of non
profit organization and the corresponding tax code. The following
organizations are all exempt from income tax and are thus considered
to be “non profit” by the federal government.

§ 501(c)(1) –
Corporations Organized Under Act of Congress (including Federal
Credit Unions)
§ 501(c)(2) – Title
Holding Corporation For Exempt Organization.
§ 501(c)(3) – Charitable
Organizations – Charitable, religious, educational, scientific,
literary, etc. organizations.
§ 501(c)(4) – Civic
leagues, community organizations, and other social welfare
§ 501(c)(5) – Labor
unions, farm bureaus, and other labor and agricultural
§ 501(c)(6) – Trade
associations, chambers of commerce, real estate boards, and other
business leagues.
§ 501(c)(7) – Hobby clubs,
country clubs, and other organizations formed for social and
recreational purposes.
§ 501(c)(8) or §
501(c)(10) – Lodges and similar orders and associations.
§ 501(c)(19) and §
501(c)(23) – Posts or organizations of past or present members of the
Armed Forces of the United States.
§ 501(c)(4) – Local
associations of employees.
§ 501(c)(9) – Voluntary
employees’ beneficiary associations.
§ 501(c)(17) –
Supplemental unemployment benefit trusts.
§ 501(c)(11) – Teachers’
Retirement Fund Associations.
§ 501(c)(12) – Benevolent
Life Insurance Associations, Mutual Ditch or Irrigation Companies,
Mutual or Cooperative Telephone Companies, Etc.
§ 501(c)(13) – Cemetery
§ 501(c)(14) – State
Chartered Credit Unions, Mutual Reserve Funds.
§ 501(c)(15) – Mutual

Insurance Companies or Associations.

§ 501(c)(16) – Cooperative
Organizations to Finance Crop Operations.
§ 501(c)(18) – Employee
Funded Pension Trust (created before June 25, 1959).
§ 501(c)(21) – Black Lung
Benefit Trusts.
§ 501(c)(22) – Withdrawal

Liability Payment Fund.

§ 501(c)(25) – Title
Holding Corporations or Trusts with Multiple Parents.
§ 501(c)(26) –
State-Sponsored High-Risk Health Coverage Organizations.
§ 501(c)(27) –
State-Sponsored Worker’s Compensation Reinsurance Organizations.
§ 501(d) – Religious and
Apostolic Associations.
§ 501(e) – Cooperative
Hospital Service Organizations.
§ 501(f) – Cooperative
Service Organization of Operating Educational Organizations.
§ 501(k) – Child Care
§ 521(a) – Farmers’
Cooperative Associations
§ 527 – Political parties,
campaign committees for candidates for federal, state, or local
office, and political action committees.

In general, there are some basic non profit
organizations that you need to know. They are:

voluntary nonprofit association of people performing some kind of
economic activity for the benefit of its members. The three major
classes are consumer, service, and producer cooperatives.

Consumer Cooperative – nonprofit association that buys bulk amounts of
consumer goods so that its members can purchase at prices below those
charges by regular businesses.

Service Cooperative – nonprofit association of consumers dealing with
services rather than goods. Examples include credit unions, and some
insurance and credit agencies. A credit union, which is made up of
employees from a particular company or government agency, receives
its funds from members. In return, members earn interest on their
deposits and may borrow money from the credit union. In most cases,
they can borrow at better rates and more quickly than they could from
for-profit banks or commercial loan companies.

Producer Cooperative – nonprofit association of producers helping members
sell or market products. In the US., most coops of this kind are
made up of farmers. The coop helps the farmers sell their crops
directly to central markets or to companies that use the members’
products. Any savings that the producer coop makes in marketing
costs go to its members.

Professional Association – nonprofit association of professional or specialized
workers seeking to improve working conditions, skill levels, and
public perceptions of it profession. Membership can be either
mandatory or voluntary. Examples include The American Association of
University Professors and the American Bar Association.

Trade Association – A trade association is a group of businesses within
an industry that work together to build industry awareness, advocate
certain political goals and provide services to members. The
government watches trade associations rather carefully so that they
do not violate collusion and anti trust laws. An example of a trade
association is NAM (National Association of Manufacturers). NAM
members include any US corporation that manufacturers anything. This
is a HUGE organization. Members include General Motors, IBM,
Caterpillar, etc. They spend enormous amounts of money lobbying
Congress top get legislation they feel is beneficial to their members
passed, or to block legislation they feel is harmful. They usually