LC Bulletin: Is a nonprofit a business?

August 13, 2010. Retrieved online August 16, 2010 from Gabriel Vasquez, Las Cruces Bulletin

Short answer, yes.

Nonprofits are a type of business.

They are crucial to the wellbeing of our community and employ hundreds in Las Cruces.

The term, nonprofit, or not-for-profit, is used to describe an organization that has a specific, usually humanitarian, mission, rather than to make a profit.

Nonprofits, like businesses, can be incorporated. These usually employ people and have a rather organized structure. Unincorporated nonprofits, such as neighborhood watch groups, usually don’t have much structure and do not employ anyone, rather they operate solely with the help of volunteers.

Local organizations such as Big Brothers Big Sisters, Mesilla Valley Hospice, United Blood Services, the Colonias Development Council, La Casa, Jardin de Los Ninõs and countless others, work tirelessly to better the community and provide a living for hundreds of Las Crucens in the process.

Nonprofits are exempt from state taxes because they work for the common good. To ensure these organizations are, indeed, working for the common good, the state requires certain organizational structures be put in place, such as a board of directors or board of trustees.

The board, much like a board of directors for a major corporation, is responsible for keeping the group on track and fulfilling its institutional mission.

Like businesses, some nonprofits need a management team – a president and CEO, executive director, accountant, business manager, communications director, etc. The list goes on.

Funding is the tricky part.

Most nonprofits are funded by state and federal grants, loans and sometimes service fees. Because it’s difficult to plan a budget that hinges on the approval of potential funding sources, many nonrecurring, it’s hard to predict just how financially stable a nonprofit organization will be.

That’s why you’ll often see a call to action for a specific nonprofit in town with limited or less-than-expected funding. To help offset these losses and to generate somewhat stable revenue, nonprofits raise funds. They’re the best at it. From mud volleyball to the Mayor’s Gala, nonprofits try to appeal to a wide variety of donors.

Any nonprofit, unincorporated or incorporated, is eligible for tax exemption. There are several types of IRS tax-exempt status, but the 501(c)(3) designation is the most favorable because it is exempt from federal taxes. Donors to the nonprofit can also take a tax deduction for the amount of their donations, making the donation process a lucrative move for donors. Other classifications, such as 501(c)(4) and 501(c)(6) are also federally tax-exempt, but only a 501(c) (3) allows donors to deduct their contributions.

Read the Las Cruces Bulletin article.

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