When thinking about non-profit organizations, people tend to assume them as a simple career choice without weighing the pros and cons of it.
They underestimate the efforts it takes to run a non-profit organization and hence tend to burn out or lose interest eventually. This is the reason it is advised to have in-depth knowledge about Non-profit’s advantages and disadvantages and then settle for it.
Non-profit organizations are multi-functional organizations having numerous purposes and jobs to serve in society. They have to cater to the needs of plenty of people and mostly survive through hefty donations from philanthropists. While they may seem to be an easy goal with simplified management, these organizations come with their own baggage of disadvantages.
These organizations are committed to working for the community and that in return excuses them from any sort of tax liabilities but at the same time they donate or help the society with any surplus earnings, they have as an organization.
If you are eager to know about the nonprofit sector or you are planning to step foot in the nonprofit career option then this article is perfect for you, we will take you through all the fundamental advantages and disadvantages of having a nonprofit career.
How do we define a Nonprofit organizations?
Going by the literal meaning of the word, nonprofit organizations are the organizations that do not use their profits on themselves rather utilize them to help different sectors of the community. These organizations take all the profits and give them back in the form of social upliftment.
These organizations are often termed as social services, public charities, non-governmental organizations, and much more such terms. These specialized organizations even reach international levels with over 1.5 million nonprofit organizations in just the United States.
The main concern people have before starting a nonprofit organization is whether they will be able to secure fundings and donations in the future or not. Although people are convinced of the idea of public service, their decision of working as a non-profit organization is a big step towards it.
Most nonprofit organizations work and serve lesser noticed segments of the community and research on topics such as education funding, disease awareness, and humanitarian aid. In contrast, other businesses follow the profit-making mechanism and distribute that profit between the company’s shareholders.
Now let us dive straight into discussing the advantages and disadvantages of working in the nonprofit sector. You can also consult a registered agent if you want more information for the same.
Advantages of having a non-profit Organizations.
First and foremost the best benefit of starting a non-profit organization is the inner satisfaction and peace a person experiences by helping a part of society or tackling a social issue. The sense of relief and the proud feeling people get by donating their profits for charity are unreal.
There are other numerous benefits of having a non-profit organization that is often left unnoticed, so let’s briefly discuss some of the major advantages of working in the nonprofit sector.
Tax exemption and eased norms
Organizations that qualify as nonprofit organizations by the government are exempted from paying any type of taxes so that they can utilize all their profits for a better cause. Non-profits are eligible for numerous financial benefits. The most interesting benefit is that nonprofits getting favorable terms and easy rent norms from their landlords or retail companies.
Additionally, they are exempted from all sorts of corporate income taxes as well. Under Internal Revenue Code 501(c)(3), public charities are legally exempted from all sorts of corporate taxes. Furthermore, these organizations are also exempted from all local and state taxes of all sorts. A company’s or individual’s charitable contributions are absolutely tax-deductible and that promotes people to start non-profit organizations of their own.
Many public charities and other nonprofit organizations are eligible for grants by several recognized public charities. Apart from providing generous tax reductions and exemptions, some organizations with the most charitable deeds are also eligible for government grants.
They are eligible for both public and private grants and that would mean that these organizations do not have to just rely on donations from the public or even government organizations to raise fundings and can look for grants to work on a social cause or expand their services. They do not have to be dependent on just fundraising events to increase donations and can easily get tons of help from these grants.
It is to be noted that the founders or owners of a nonprofit organization are not individually liable for any kind of debt and hence the creditors are limited to assets of the nonprofit organization only. But then again, exceptions are present everywhere, so here too a person cannot use the tag of a nonprofit organization to shield them against any sort of irresponsible or illegal act done by the organization’s owner.
Also, if the owners of the organizations are not working in the best interests of a nonprofit corporation then the founders have a fiduciary responsibility to not harm their organization or they’ll be held responsible for it.
If anybody is dissatisfied with your organization’s work and proceeds to sue your nonprofit corporation, then they can only go against the company’s entities and assets and not behind the owner’s or director’s personal entities. This segregation of corporations and directors is crucial for particular charitable organizations that work one on one with society.
The reason behind this limited liability status of nonprofit organizations is that these charitable organizations work as limited liability companies and that keeps the creditors constrained to just the organization’s assets.
Helping different strata of society
This is not a monetary benefit but a humanitarian benefit that results in human satisfaction by helping individuals continually. For instance, imagine a nonprofit organization working on disease research The results are often immediate when offering services or programs for the local community.
For example, the benefit of working with medical research is that the organization will be working on a cure of some serious disease and help billions of people around the world.
So, in broader terms, people working in the nonprofit sector get highly excited about the intrinsic awards they receive, for instance, if a nonprofit organization is able to bring a positive shift in any person’s life they consider it as the topmost reward regardless of the monetary benefits.
People wanting to make a difference in the world and are highly motivated to bring a wave of change in people’s lives are the ideal employees for nonprofits.
Formalised structure of nonprofit organisations.
The structure of a non-profit organization is different than other organizations or businesses. In a nonprofit structure, the organization is a legal body that is exclusive of its founder’s rights. These organizations exist in their own right.
The nonprofit organizations are structured in such a way that the purpose or mission of the non-profit is given utmost priority and people running that organization are put on the back seat.
Additionally, a nonprofit structure can provide different roles and descriptions which require more skills and more professional qualifications.
Disadvantages of having a non-profit organizations
We have curated a brief list of major disadvantages of the nonprofit sector for you, following are the major disadvantages:
Fund-raising isn’t a child’s play and can pose as one of the first and foremost constraints. Considering a situation of economic downshift as in today’s times due to the covid-19 pandemic, fund development becomes an almost impossible task.
There have been numerous instances where non-profit organizations have to shut their business down due to a lack of fundings. So, what exactly is required to develop more funds? the answer to this is that fundraising requires an efficient grant writer that helps in high rates of fund development. Nevertheless choosing a grant writer is not an economic option but can turn out to be magical for raising funds.
Time and money investment
A non-profit organization is a fruit born by extensive hard work and tireless efforts. The only nonprofit organizations that are successful in today’s scenario are the ones that have an extremely devoted employee team and are willing to invest time into it.
Moreover, starting a nonprofit organization can also take a major toll on your finances and can create a hole in your pockets. This is the reason it is advised to hire a consultant to make sure you are following the process right and are paying for the right things.
Additionally, there are millions of agencies or corporations actively competing for these resources so it becomes a tiresome task to receive funds. A nonprofit corporation with exemplary vision and a top-notch business plan can be a verified competitor for receiving funding easily.
Being a nonprofit organization, transparency with people comes naturally with such organizations and the idea that they work on. People can easily ask for proof or request copies of expenditures or donations from the corporation and this often leads to these nonprofits being scrutinized or called out for their expenditure details or other expenses.
There have been several instances in the past where nonprofit agencies have been found guilty of misusing their donations or instances of overpaid employees.
While the financial statements of nonprofit organizations are open to the public and are subject to public scrutiny but at the same time, this often leads to increased accountability leading to unneeded press attention. This is the reason for nonprofits hiring third-party professionals to keep track of their finances and operations to avoid any hurdles by the public.
So, to conclude, we cannot allow nonprofits to stray away from public inspection but help these organizations work efficiently so that they have no reason to be scrutinized.
Starting a nonprofit organization is a big step in itself and the continued maintenance it requires to function efficiently, in the long run, is difficult to comply with too.
These organizations have to file annual reports and also keep on maintaining their financial situation throughout their journey.
Lack of profits
Being a nonprofit organization’s owner, you don’t receive any profits and just keep on cycling back the profits for people’s welfare. This makes it difficult to grab interest from investors because no shareholders receive profits from non-profit organizations.
Huge amount of paperwork
The paperwork required to start a normal business is a lot less than the paperwork and documentation required to start a nonprofit organization.
There are plenty of tax norms and nonprofit formalities to be completed before starting a nonprofit corporation and to make sure that all this paperwork is done correctly and smoothly nonprofits hire an accountant or a lawyer.
Here is the complete guide on how to start an LLC, if you are highly convinced to open a non-profit organization.