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What is Non-Profit Administration?

Matt Brady
Matt Brady

A non-profit administration is an organization that dedicates all profits toward furthering its company goals, as opposed to a for-profit organization, which dispenses profits to shareholders and owners. Non-profits are often companies dedicated toward bettering a community, such as a charity. They can also be organizations that unite members of a group or profession, such as a political party, professional association, or federal agency. In many countries, non-profit administrations are given tax exemptions on items such as property and income tax. Many universities have taken to offering courses and degrees to train students in non-profit business.

Non-profit administrations start in several different ways. Most advanced start-ups form an incorporated business with tax-exempt status; however, a group of individuals can also form an unincorporated, informal non-profit administration. It all depends on the goals of the business. For example, a group of peers seeking to form a club to network and exchange ideas may not need to form a corporation or file any special tax work. If, however, the group forms a financial investment club that accepts membership fees, it may be wise to structure the club under a corporation and special tax status.

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

Placing a non-profit administration under a corporate structure has numerous advantages. It allows the business to exist as its own legal entity, which shields its members from personal liability and allows the business to hold its own assets. As a corporation, an administration can also file for tax exemptions that for-profit business models can't apply for. The tax exemptions on property and income tax can save a non-profit large amounts of money—savings the business can use to further its operations.

Running a non-profit administration takes discipline. Money must be managed in a very particular way to continue to qualify as a non-profit organization. For-profit administrations have Chief Executive Officers (CEO) and Chief Operating Officers (COO) who—with the cooperation of a board of directors—are able to run the company and benefit from greater salaries. Those who run a non-profit, however, cannot benefit from profits in the same way. By and large, profits are funneled back into business operations rather than into the pockets of shareholders and CEOs. Therefore, someone who runs a non-profit charity for the homeless wouldn’t see a salary increase as a result of increased funding. Generally, pay grades are determined by a voting board of members, who must keep careful track of how donations and funding are received and spent.

A good number of institutions offer higher education for individuals wishing to one day run a non-profit. Degrees in non-profit administration are often offered in undergraduate and graduate studies. Often, a college or university will offer students a chance to choose a non-profit concentration with a related degree such as business management.

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