What Are Non-Profit Models?

Jan Fletcher

Non-profit models are typically categorized according to the funding sources the non-profit seeks and the needs it intends to meet through acts of benevolence. An organization formed as a non-profit entity conducts its activities without distributing a profit to shareholders. Non-profit models include those in which funding comes through public donations, a mix of donations and fees requested for services, or a partnership between government agencies and charitable patrons.

Some opera companies are run as non-profits.
Some opera companies are run as non-profits.

In some non-profit models, operations are funded through a select group of wealthy benefactors. Non-profit models that operate as foundations build equity through donations, then use the earnings on that equity to bestow grants. In a governmental partnership non-profit model, the organization receives funds from a government agency in exchange for rendering services to a specific population in need. If the beneficiary is a city park for example, a nonprofit group that seeks to support the park through fundraising may form a private/non-profit partnership model. The group may then use the non-profit entity for the purpose of purchasing playground equipment, or other infrastructure improvements.

Non-profit models may be public or private foundations.
Non-profit models may be public or private foundations.

In terms of administrative organization, in some non-profit models the organization functions as an independent entity steered by a board of directors. Businesses using other non-profit models are designed to work locally, but are linked together in national or international affiliations. The latter typically operate under a hierarchical authority structure. This is in contrast to a local neighborhood soup kitchen that may operate independently.

A successful non-profit model strives for a good match between a donor's desire to do good and the needs that the non-profit is striving to meet. With that in mind, non-profit models are usually chosen to cultivate the best match between the two. If the beneficiary is a community opera company, for example, and the donors are moderately wealthy musicians that love operatic performances, the non-profit model will be tailored to conducting activities that cultivate a successful opera performance. A small board may meet quarterly to plan an annual performance, or to raise funds for costly costumes.

Non-profit models may be public or private foundations. Research activity is one common non-profit activity that may be funded through a private foundation. Scholarships are often awarded through private foundations, which use the foundation's investment earnings to support higher education. Many large corporations have foundations that bestow grants for various purposes.

A not for profit model may also be organized around facilitating relationships. Various social and psychological support groups use this mentoring model. Tax-exempt status is not directly connected to the operating model for a non-profit. Various laws and regulations define nonprofits that have tax-exempt status, but not all non-profits are tax exempt.

Soup kitchens can be independently operated or affiliated with a larger national network.
Soup kitchens can be independently operated or affiliated with a larger national network.

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