When people think of Non-profit they often forget that a Non-profit or NGO (Non-governmental Organization) is a corporation. We have gotten so used to saying the abbreviated “Non-profit” that we forget it is just a short-hand for “Non-profit Corporation.” In fact in the purest sense a Non-profit is a corporation with a charitable purpose. The implication being that they have to follow all the rules that a regular corporation does. All too often those that start Non-profits or work for Non-profits or Volunteer for Non-profits are trying so hard to escape the corporate world they ignore this simple fact until it is much too late. What does it mean? It means that the rules that govern a corporation, the board of a corporation, the bookkeeping of a corporation, the fiduciary duties of a corporation, the legal obligations of a corporation, etc. all apply to non-profits. All too often I hear, “we aren’t a corporation, we are a 501c3.” This just reflects a misunderstanding. A 501c3 is a corporation with a non-profit purpose that has qualified for the IRS 501c3 tax exemption, which allows donors to take a tax deduction when they donate funds to the organization. That is it. It doesn’t magically take the organization out of the world of corporations to a world where corporate rules no longer apply. Maybe it is because of the prevalence of this false belief that states like New York have started passing legislation like the Non-Profit Revitalization Act to remind Non-profits that Financial Oversight, Director Independence, Corporate Structure, Conflicts of Interest, and the ability of Committees to bind an Organization are parts of Corporate Governance Rules and Regulations that legally apply to Non-Profits just like all other Corporations.
To learn more about the New York Non-Profit Revitalization Act see:
What Can We Learn from New York’s Non Profit Revitalization Act of 2013?
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