Non-profit organizations exist to carry out many different kinds of work and include churches, public hospitals, organized volunteer groups, labor unions, and public charities. They are influential in almost every walk of life. However, to be officially recognized as a bona fide non-profit entity a group must fulfill certain conditions.
Basic Definition
A non-profit organization does not exist in order to generate profits for stockholders or owners, its income is retained to fund operational activities and expenses. Non-profit organizations must be designated as such at the time of their foundation and may only pursue certain federally-specified activities. Generally speaking these are activities dedicated to the public good, including the provision of education, legal aid and health care.
Tax Exemption
Non-profit organizations can apply for federal tax-exempt status. Cornell University Law School lists organizations eligible for exemption as those "operated exclusively for religious, charitable, scientific, public safety, literary, or educational purposes," or for the "prevention of cruelty to children or animals, or to develop national or international sports." Non-profit organizations are also exempt from social security tax (although the majority pay this tax voluntarily) and in some states non-profit organizations do not have to pay state taxes such as sales tax -- however different states have different definitions and laws regarding non-profit organizations and tax-exempt status.
Standards for Seeking Charitable Donations
The Standards for Charity Accountability were established by the Better Business Bureau's Wise Giving Alliance and apply when non-profit organizations seek charitable donations from the public. The key principle is transparency, so that donors can give to the charity with confidence. Non-profit organizations who wish to be recognized by the Wise Giving Alliance must provide paperwork outlining the way they run their affairs, how they spend their money, and showing their readiness to disclose relevant information when requested. The Standards for Charity Accountability do not apply to organizations who do not seek donations from the general public (i.e. private foundations).
Examples of Non-profit Organizations
Non-profit organizations range from multi-billion dollar entities such as the Bill & Melinda Gates Foundation through established internationally active groups like Amnesty International, the Red Cross and the World Wide Fund for Nature to small grass-roots community associations dedicated to one specific aim. Anyone who is prepared to follow the federal guidelines can start a non-profit organization and Gates' example shows that there is virtually no limit to how large it can become.
