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What is a Charitable Non-Profit?

M. McGee
M. McGee

A charitable non-profit organization is a business that reinvests any surplus resources into the organization rather than providing payouts to employees or stockholders. As a charitable organization, these groups provide donations and assistance to at-need people and locations. The actual methods and practices of these organizations are poorly defined, so one charitable non-profit may have little in common with another. While the majority of charitable non-profit organizations provide legitimate help and care, controversy has often dogged these some of these groups and their practices.

A typical business operates in order to make a profit. This profit is paid out to employees, owners or stockholders as additional money in the form of bonuses and dividends. A non-profit business reinvests that money into the business — or in the case of a charitable group, offers it as donations.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

This doesn’t mean that a non-profit group is not actually a business. These groups will often sell products and make corporate investments. The goal of all these operations is to make money for paying employees and improving the organization. In the case of a charitable non-profit organization, the money is also part of the contributions donated by the group.

While exactly how a non-profit organization operates is well known, the actual definitions of charitable organization allow for several different structure options. Many organizations operate like a normal business, but others may subsist totally on grants and donations from interested parties. Some organizations give money directly, while others give money only to other charitable groups. These distinctions all come with different operating structures and methods.

One of the few things most charitable non-profit groups have in common is taxation status. Generally, any official non-profit organization is exempt from property taxes and most types of income tax. This tax exemption is designed to help these organizations prosper without many of the common costs of business operation.

These exemptions are also the cornerstone of one of the two main points of controversy surrounding charitable non-profit groups. By removing these two large expenses, certain groups are able to put away a great deal of money beyond that of a normal business. This can lead to a number of business practices that are against the spirit of the laws providing the relief. In addition, this occasionally leads groups to apply for charity status for personal gain.

The second common problem with charitable non-profit groups regards their oversight. As these groups are not tied to stockholders or typical profit-based systems, they do not need to operate in a typical business sense. These groups can begin operations and form policies that are poorly defined and expensive. These complex policies may lead to a lower profit and therefore a lower amount to donate.

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