Definition of ‘non-profit’, ‘not for profit organisation’, ‘charity’ etc

(Updated)

In our discussions with those thinking about establishing a not-for-profit organization, it is apparent that there is still a lot of confusion about the terms ‘non-profit’, ‘not for profit’ etc.

The various terms are used imprecisely and interchangeably, though the term ‘Registered Charity’ is used to refer to an organisation registered with Charities Services (Charities Services, Department of Internal Affairs) and this term (or words implying same) may not legally be used for an organisation which is not so registered. Legal penalties may be applied if an organisation falsely suggests that it is a Registered Charity.

Other than this there is no legal definition of ‘non-profit’, ‘not for profit’ etc and is  estimated that there are over 114,000 nonprofits in NZ (a quarter of whom are registered NZ charities) and a large percentage of whom are unincorporated.

“There is no single agreed term that fully describes the nonprofit sector in Aotearoa/New Zealand. Rather, a number of terms are commonly used that refer to all or part of it. The application of these terms to organizations and to fields within the sector can overlap and sometimes terms are used interchangeably. In fact, there are debates around the use of all of the terms identified (Community and Voluntary Sector Working Party 2001, 202, 203; Robinson 1993).

The most frequently used terms are nonprofit (or non-profit or not-for-profit), voluntary, community, voluntary welfare, nongovernmental, third sector (sometimes fourth), and independent sector. There can also be differences between the terms organizations use to refer to themselves, and those others use to refer to them. For instance, the Ministry of Health uses the term NGO to refer to all health groups that are non-statutory and nonprofit making, but not all of these organizations will necessarily refer to themselves or the sector of which they are a part in this way, some preferring the terms community, voluntary, or nonprofit.”   http://giving.org.nz/files/Defining-the-NonProfit-Sector-New-Zealand-6-Sept-06.pdf

[Nonprofits] “are not primarily commercial in purpose and do not distribute profits to a set of directors, stockholders, or managers. Non-profit organisations can generate surpluses in the course of their operations, but any such surpluses must be reinvested in the objectives of the organisation. This criterion serves as a proxy for the “public purpose” criterion used in some definitions of non-profit, but it does so without having to specify in advance and for all countries what valid “public purposes” are.”  http://ccss.jhu.edu/wp-content/uploads/downloads/2012/06/NewZealand_NationalReport_2008.pdf

In the online book “Charity Law in New Zealand” author Dr Donald Poirier notes that “A not-for-profit organisation is an organisation that is not a household, government
or for-profit business. It is an organisation that does not distribute its surplus funds
to owners or shareholders, but instead uses them to help pursue its goals. Charitable
organisations are one type of not-for-profit organisation, and represent about one-fourth of all not-for-profit organisations.”

Statistics New Zealand has been quoted as suggesting that a non-profit organisation must be:

  • Organised, to the extent that it can be separately identified,
  • Not-for-profit and not distribute any surplus that may be generated to those who own or control it,
  • Institutionally separate from government (that is, private),
  • Self-governing (that is, in control of its own destiny), and
  • Non-compulsory (that is, membership and participation are voluntary).

There are various types and structures of ‘non profit’ organisation. See this post  

 

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