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nonprofits can be a great way to help groups of people or other organizations who otherwise might be struggling the term nonprofit is thrown around a lot but what exactly is a non-profit and how do they work in this video we'll go over what a non-profit corporation is and explain how they differ from other business structures so what is a non-profit corporation a non-profit corporation as the name suggests is a legal entity that exists for some defined purpose which doesn't seek to make a profit by contrast llcs and corporations are legal entities that exist to make a profit a non-profit corporation is purpose driven think charities churches and social advocacy groups a company whose goal is not to make a profit for themselves typically they're an organization that wants to make money in order to help further a social cause or provide a public benefit what this means is that after operating costs things like office expenses paying employees and any other materials they may need to run a company any excess money goes to whatever cause they're trying to help like a regular corporation a non-profit corporation has a set of bylaws and some numbers of directors and officers the bylaws are the rules that determine how the nonprofit will be governed and run you can think about it as a constitution for the nonprofit it makes the rules and priorities clear for everyone involved the directors of a non-profit are responsible for overseeing the operations of the organization together they form the board of directors the power and influence of the directors over the organization comes from them as a board the directors themselves do not have any authority as individuals the board typically creates the policies that govern the nonprofit they also oversee management level hiring such as the company officers the officers of a non-profit such as the president or secretary are individuals with responsibilities and the authority to execute based on their job description together the officers and the board will come together to make up the organizational structure of a nonprofit an officer may also be on the board of directors and serve both roles if allowed to do so by the organizational bylaws what makes non-profits different from other business structures is their ability to apply for tax-exempt status non-profits can apply for 501c3 tax-exempt status what this means is that if their status is accepted they do not need to pay any taxes on any money they make as a non-profit this allows the maximum amount of money to go directly from the non-profit to the social benefit or cause they are supporting a common misconception of non-profits is that they are run only by volunteers most non-profits have staff that work for the company with the possibility of using volunteers to perform some of the non-profit services under the direction of paid staff however non-profits need to be careful about balancing employees salaries and how much they provide to the people or groups they are trying to help non-profits who have employees with high salaries may face regulatory scrutiny a second misconception is that non-profit organizations may not make a profit although the goal of nonprofits isn't specifically to maximize profits they still have to operate as a fiscally responsible business they must manage their income from any grants donations income from services and expenses so as to remain a fiscally viable entity nonprofits have the responsibility of focusing on being professional and financially responsible while replacing self-interest and a focus on profit with their focus on their mission with all of this in mind do you need to form a non-profit in order to raise money for a social benefit or cause just because you want to raise money for a person or organization doesn't mean you need to form a non-profit corporation you can run one-time charity events to raise money without needing to be a non-profit corporation running something like a charity auction or raising money to donate to an organization are informal examples if you have long-term goals for your non-profit then forming a non-profit corporation may be more suitable as it will provide certain benefits such as limited liability protection an enhanced ability to raise funds and apply for grants and discounted rates on stamps as well as certain marketing and advertising costs and as mentioned before you will also receive tax exemptions once you obtain 501c3 status an additional benefit of operating as a non-profit comes in the form of tax deductibles that your donors can claim if you were to raise money using a one-time charity event any donations you'll receive below a certain threshold wouldn't have to have taxes paid on them however if you receive donations as a non-profit corporation your donors can write off their donation from their taxes which may further incentivize people or organizations to donate if you're looking to create your own non-profit organization check out our other video linked below how to start a nonprofit corporation a non-profit corporation is a business structure just like an llc or a regular corporation however unlike an llc or regular corporation a non-profit corporation's goal is to raise money for a social benefit or cause instead of making money to make a profit nonprofits have similar structure to a corporation with the added benefit of tax exempt status allowing them to maximize the amount of money that goes towards the benefit or cause they are supporting now you know what a non-profit corporation is for more information and a detailed guide on how to form a non-profit corporation visit our site at startupsavant.com give the video a like if you found it useful and subscribe if you'd like to see more if you have questions leave a comment below and if you're looking to start a non-profit of your own we wish you the best of luck you