Do Non Profits make money?
We all know about charities and non profit associations and the amazing work they do around the world. While we know they bring in money in way of donations and other sources, this does not mean they do not make profit.
On a technical note: Non profit organizations are entities created for purposes other than making a profit, such as charitable, educational, religious, or social goals.?
So they don't make any money? You just said they did?
NO! This is a massive misconception about these entities. This leads to the public believing that they are always cash strapped. Unfortunately, this is what the entities themselves put out. They are always looking for donations, and rightly so.?
What is the difference?
While they can generate revenue, the key difference is that any surplus income is reinvested back into the organization to further its mission rather than being distributed to shareholders or owners.?
This means that, while they may "make a profit" in the sense of having surplus funds, it’s not profit in the traditional business sense, as it must be used for the organization’s objectives.
An example here:?
ABC ltd has revenue of 100 000 and a surplus of 35 000. The company then declares a dividend or bonuses to shareholders, individual persons
Charity XYZ has revenue of 100 000 and a surplus of 35 000. No person gets that money. That 35 000 gets 'ploughed back" into the cause.
If you have any further questions, contact Bruce on [email protected] or 081 529 5129
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* Once again, please consult your local tax expert for more details on this in your region.