StudySmarter: Study help & AI tools
4.5 • +22k Ratings
More than 22 Million Downloads
Free
|
|
Non-Profit

Not all businesses have the mindset of maximising their profits. For instance, most government organisations and charities do not aim to bring in as much revenue as possible. These organisations earn revenue but do not pay any of it to the owners. Instead, not-for-profit organisations tend to focus on social objectives rather than monetary ones.

Mockup Schule Mockup Schule

Explore our app and discover over 50 million learning materials for free.

Illustration

Lerne mit deinen Freunden und bleibe auf dem richtigen Kurs mit deinen persönlichen Lernstatistiken

Jetzt kostenlos anmelden

Nie wieder prokastinieren mit unseren Lernerinnerungen.

Jetzt kostenlos anmelden
Illustration

Not all businesses have the mindset of maximising their profits. For instance, most government organisations and charities do not aim to bring in as much revenue as possible. These organisations earn revenue but do not pay any of it to the owners. Instead, not-for-profit organisations tend to focus on social objectives rather than monetary ones.

Non-profit organisation

The non-profit sector consists of various sizes and types of organisations. They tend to serve a charitable or a social purpose.

Non-profits also refrain from paying dividends or any form of profit to their shareholders. Instead, they create social benefits, also known as social capital. By creating social capital, non-profits aim to solve an existing problem or issue in order to advance humanity in a certain way.

A non-profit can be a social enterprise, that has a social aim, and operates to benefit a local community or society as a whole. The mission of social enterprises can range from community service projects, childcare, recycling companies, apprenticeship programs, etc.

A non-profit organisation focuses on a specific social cause. Unlike for-profit companies, non-profits do not distribute their profits to shareholders in any form. They use their revenues to pursue a social cause, donate the money to a social objective, pay for the costs of their operations, and advocate for their cause.

Why are non-profits established?

Non-profits can be established for a variety of reasons.

Owners may share a strong passion for a particular cause, like protecting endangered species, and set up their enterprise to raise funds to help wildlife in a certain way.

Some people might start a non-profit as a hobby. This may include setting up an enterprise for sport or recreation purposes.

Non-profit organisations are accountable to a number of stakeholders. These include those who are receiving their services, volunteers, the community, and government agencies. This is another way in which non-profit organisations differ from for-profit organizations. They tend to serve multiple stakeholders, have a social purpose, and are not set up to make a profit from their operations.

Example of a non-profit organisation

There are numerous non-profit organisations worldwide. Some examples you might have already heard of include the Worldwide Fund for Nature (WWF), The Red Cross, UNICEF, or Doctors Without Borders.

Common non-profit business types

There are a huge variety of non-profit organisations, but they can mainly be categorised into three different general groups:

Philanthropic organisations

These are non-profit, non-governmental organisations that use donated assets and income to provide social services and create social capital. They can take the form of community foundations or charitable trusts.

UK Community Foundations is a charity that is committed to bringing positive social change in the UK.

Advocacy organisations

They are typically formed in order to promote or lobby for a certain social cause or political movement. They can organise fundraisers and other events to campaign for the causes they are striving to support, and encourage the public to also support their cause. These types of organisations typically raise donations through monthly membership programs.

Sisters Uncut is a British feminist group that advocates for survivors of domestic violence.

Mutual benefit organisations

These are a type of non-profit organisation that works for the benefit of its members rather than a local community or society as a whole. A common example of a mutual benefit organisation is a labour union or a chamber of commerce. Their funds come from membership fees, and the benefits of their service are enjoyed mostly by its members. Co-operatives are a common example of mutual businesses and are operated by their members who collectively manage the business.

A detailed example of a non-profit organisation

Today, social media and digital business play a huge role in our daily lives. It does so too in the role of social advocacy and non-profit organizations. An example of a non-profit organisation making great use of its digital resources is Greenpeace.

This environmental non-profit uses GPS technology to let people know about their cause. They have recently cooperated with a team of scientists and experts to make a live feed tracking of whales. With GPS technology they were able to follow the whales as they migrated from the north to the south through the ocean. They were also able to track how the whales hunted and moved through dangerous waters. This campaign was called the 'Great Whale Trail', and it encouraged people to make donations and raise funds through social media in order to support the non-profit and one of their main causes, protecting whales. The campaign ended up being a success and thousands of dollars were raised¹.

Difference between non-profit and not-for-profit

Non-profit
Not-for-profit
Operate to benefit the public good.Exist to fulfil an owner's organisational goals.
Separate legal entity to owners.Not a separate legal entity.
Try to earn money but profits do not go to owners.Operate without the goal of earning profits.
Operated by volunteers.Full-time employees who are paid a salary.

Public sector businesses

Public sector organisations are usually run by national or local governments. They are often funded by them, too. They provide goods and services that benefit the community. They tend to cover costs with money raised from taxation.

Public corporations

Public corporations are organisations owned by the state but sell products and services to businesses in both the public and private sectors. They are managed by national or local government. Examples include:

  • BBC

  • Northern Trains

  • Pension Protection Fund

  • Civil Aviation Authority

Public services

This area of the public sector includes organisations that provide services to the entire nation. Opportunities in the public services can be categorised into central and local government. Some common fields for public services include healthcare, social work, teaching and education, and law enforcement and security. Examples of public service organisations include:

  • The NHS

  • The Armed Forces

  • National Crime Agency (NCA)

  • Her Majesty's Revenues and Customs (HMRC)

  • Security Services, MI5

Municipal services

Municipal services are services offered by local governments and councils. Examples include libraries, street lighting, and municipal parks and recreation.

Non-Profit - Key takeaways

  • Instead of profit maximisation, non-profit organisations tend to focus on social goals.
  • Non-profits are social enterprises that aim to create social capital (solve a problem or create social change).
  • Since non-profits do not attempt to maximise profits, they also do not pay dividends to shareholders. Instead, non-profits use their capital and funds to cover the costs of their operations.
  • Non-profit organizations can be philanthropic organisations, advocacy organizations, or mutual benefit organisations.
  • Public sector organisations are owned and funded by either the national or local government.

¹ Marlin Communications, Top 6 Examples of Not For Profit Organizations Making Effective Use of Digital Technology, 2020. (https://marlincommunications.com/blog/top-6-examples-of-not-for-profit-organisations/)

Frequently Asked Questions about Non-Profit

The non-profit organisations earn revenue but do not pay any of it to the owners. These are separate legal entities.

The non-profit organisations earn revenue but do not pay any of it to the owners. These organisations operate for social causes and not to earn profits.

Volunteers work for the cause and the work is mostly unpaid apart from operational costs.

A non-profit organisation focuses on a specific social cause. They use their revenues to pursue a social cause, donate the money to a social objective, pay for the costs of their operations, and advocate for their cause. 

Test your knowledge with multiple choice flashcards

Which of the following statements about non-profit organizations is true?They do not make any profits. Stakeholders are not involved in the business. They do not distribute profits. They can only be established as hobbies. 

Which of the following statements about co-operatives is false?They are run for the benefit of the government.Co-operative are a common type of mutual business. Co-operatives must represent social responsibility. Co-operatives are run by members who each have a say in the management of the business.

Which one of the following does not make up one of the ethical values ​​of a co-operative?Honesty Social responsibility AdaptabilityOpenness

Next

Join over 22 million students in learning with our StudySmarter App

The first learning app that truly has everything you need to ace your exams in one place

  • Flashcards & Quizzes
  • AI Study Assistant
  • Study Planner
  • Mock-Exams
  • Smart Note-Taking
Join over 22 million students in learning with our StudySmarter App Join over 22 million students in learning with our StudySmarter App

Sign up to highlight and take notes. It’s 100% free.

Start learning with StudySmarter, the only learning app you need.

Sign up now for free
Illustration

Entdecke Lernmaterial in der StudySmarter-App