Formation of Non Profits and the Types of Non Profits

Some of the fundamental questions if one is interested in knowing more about the Non Profits world are the questions; how are non profits formed? And how many types of non profits are in existence? This blog posting is an attempt to help answer these two fundamental questions.But, before I answer these two questions, let me introduce some statistics about non profits in the United States:

According to the Urban Institute, the number of non profits has been growing steadily. During the last five years from 2004 to 2010 the number of registered nonprofits has increased from 1.5 million to 1.9 million, up 27 percent. This increase is also accompanied by an increase in revenues from $2.4 trillion to $3.4 trillion, up 42 percent, and assets have sky rocketed from $4.8 trillion to $7.8 trillion, up 67 percent. Also, based on IRS reports, Nonprofits accounts for about 12 percent of the gross domestic product (GDP).With this brief introduction, let me now go ahead and answer the preceding two questions.

The way non profits are created may differ from country to country, however in the United States, nonprofit organizations are created by filing bylaws and/or articles of incorporation in the state in which they expect to operate. Examples of these nonprofit organizations include charities, trade unions, trade associations, foundations etc. Creation of public nonprofit organization is sanctioned by formal community action to provide community services. Also the law allows them to levy taxes to enable them carry out their mission. Example of public nonprofit organizations includes federal, state, and local government units.

The management of these non profits is in the hands of board of directors. These are leading citizens who volunteer their time. They may delegate the day to day running of the organization to a paid employee with titles such as executive director, executive secretary, manager etc. In most cases, the board also appoints one of its members to play the role of a treasurer whose office is of high importance second to the chairman of the board.

Nonprofit organizations are formed to cater for societal needs that are not directly provided by the government.  They have no profit motive as their name indicates .They have no equity shares that can be traded at the stock exchanges. They may be financed by taxes and or donor contributions.

The chart below shows different categories of nonprofit organizations.

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2 Responses to Formation of Non Profits and the Types of Non Profits

  1. I would like to say thanks for the efforts you have made compiling this article. You have been an inspiration for me. I’ve forwarded this to a friend of mine.

  2. Emory says:

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