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What Is a Nonprofit Organization?

Observers and advocates are often frustrated that this important aspect of everyday life is named by what it is not. Not for profit. Not part of government. Various substitutes have been proposed, but none have come into general usage. Among the proposed replacements perhaps the clearest is "community benefit organization," focusing on purpose, not on corporate form.

The Center for Civil Society Studies at Johns Hopkins University has conducted careful research on the scope of "nonprofit" and similarly sponsored activities in many parts of the world. In their studies, "nonprofits" are defined as:

(i) Organizations, that is, institutionalized to some extent;
(ii) Private, that is, institutionally separate from government;
(iii) Non-profit-distributing, that is, not returning profits generated to their owners or directors;
(iv) Self-governing, that is, able to control their own activities; and
(v) Voluntary, that is, non-compulsory and involving some meaningful degree of voluntary participation.

In some parts of the world there are specific laws, regulations and customs that create a policy framework within which identifiable nonprofit organizations operate. Such organizations may be formally recognized by the government; usually, there specific limitations, privileges and exemptions that apply to these recognized groups concerning taxes, political activities, the employment of volunteers, and so forth.

At the same time, it is certainly true that people have joined together in groups to achieve common purposes throughout human history and that frequently they have worked without any external coercion and without the goal of making money ("sin fines de lucro," in the elegant Spanish phrase that captures the idea). Such activities continue to this day, of course, in places where a fully developed "nonprofit sector" exists, such as the United States or Australia.

There's a lively short video about the scope and significance of organized nonprofit work in the U.S. by Ben Klasky, "the philanthropy guy," at http://www.youtube.com/watch?v=0myNj8BHt_4

To learn more about this work in the U.S., these websites may be helpful:

Independent Sector
The National Center for Charitable Statistics
Guidestar
National Council of Nonprofits and the information provided by its member associations in many parts of the country

There are similar organizations in many other countries but no reliable list of national umbrella bodies exists.

In areas where the policy environment for nonprofit organizations is well established, it may be relatively easy to get information about the numbers, sizes, and activities of the formally organized nonprofit organizations. Here are examples from the United States and Uruguay, among many. Studies like these draw on official statistics, though, so even in places where nonprofit organizations are officially recognized and their work recorded, it is difficult to get accurate information about the scope of informal cooperative and community-serving groups.