What is a nonprofit organization (NPO)?

A nonprofit organization (NPO) is one that is not driven by profit but by dedication to a given cause that is the target of all income beyond what it takes to run the organization. Because of this, NPOs receive tax-exempt status from the federal government, meaning they don't have to pay income tax. Nonprofit organizations are often used for trusts, cooperatives, advocacy, charity, environmental and religious groups. Many, but not all, NPOs have paid staff in management positions; almost all use volunteers. Unlike for-profit businesses, NPOs have no owners and any surplus profits after operating expenses are used to further its goals instead of being distributed between members or employees of the organization.

What is the difference between an NPO and a not-for-profit organization?

Nonprofit and not-for-profit are both widely used to refer to NPOs but there are subtle differences. The United States Internal Revenue Service (IRS), for example, uses not-for-profit to refer to activities like hobbies in which revenues are not involved.

What is the difference between an NPO and NGO?

The terms NPO and NGO (non-governmental organization) are also often used interchangeably but they have some key differences. NGOs are separate from the government and require no government council but depend on the government for funding by means of government grants. However, most NGOs are also nonprofit organizations and thus have nonprofit status.