Types of nonprofits and how they’re different around the world
Published
December 19, 2022
Giving is global and countries define the terms “nonprofit” and “not-for-profit” differently. Learn the distinctions and how organisations make an impact.
Across the globe people donate and give, but not every country has the same definition of what a nonprofit is, and some types can be more familiar than others.
Here’s what Australia, New Zealand, the United States, Canada, and the United Kingdom consider a nonprofit to be, and several popular types of nonprofit organisations that are common in each area.
The Australian Taxation Office defines not-for-profit (NFP) as “organisations that provide services to the community and do not operate to make a profit for its members (or shareholders, if applicable).” Some examples include recreational clubs, childcare centres, private foundations, and neighbourhood associations.
The most common nonprofits in Australia include:
Incorporated associations are membership-based organisations that are typically established for cultural, charitable, or recreational purposes. For example, incorporated Aboriginal associations often require their members to meet certain membership requirements, like proof of ancestry.
The purpose and activities of an incorporated association must be lawful. In some jurisdictions, they also need to relate to the community or sporting objectives.
Charitable trusts are trusts with assets and property that are “used solely for the advancement of religion, relief of poverty, advancement of education, or other purposes beneficial to the community.” For example, John T Reid Charitable Trusts fund organisations that place a high value on health coverage and support, the environment, social welfare, education and youth support, and arts and cultural heritage.
Companies limited by guarantee have no shareholders. Their members guarantee to pay a specified sum to creditors if the company dissolves and can’t afford to pay its debts. Individual members of these companies have almost total liability protection and can buy and sell property under the name of their organisation.
Nonprofit organisations in Australia are tax-exempt as long as the Australian Taxation Office (ATO) deems them so. Categories of tax-exempt organisations include, but are not limited to:
New Zealand nonprofit organisations can be “incorporated or unincorporated societies, associations, or groups,” but they “cannot carry activities for the profit or gain of your member. You also cannot distribute money or property to members.”
In addition to charitable trusts, common legal structures for New Zealand nonprofits include:
An incorporated society is a group or association with at least 15 people who are registered under the Incorporated Societies Act 1908. Incorporated societies vary greatly, but usually their members share a common interest, including country clubs, advocacy groups, real estate boards, business leagues, political organisations, domestic fraternal societies, sports clubs, and public safety organisations.
Industrial and provident societies consist of small business owners who become part of a larger organisation for mutual benefit, while still operating independently. Some of these societies include working mens’ clubs and housing associations. These societies often have membership dues, but their members aren’t liable for any contracts, debts, or other obligations the society has as a whole.
A social enterprise is an organisation with a defined social mission or purpose that generates revenue to support its cause. These can be social welfare organisations, veterans and armed forces organisations, lobbying firms, and civic leagues, to name a few. Some examples include Cactus Outdoor, which helps new New Zealanders find employment and training opportunities, and The ReCreators, which makes jewellery, home decor, bags, and kids toys while promoting sustainability and upcycling.
New Zealand’s nonprofits aren’t required to pay taxes, and the donations people give are tax-deductible. There’s also no national organisation that governs nonprofits. The registration requirements depend on what legal form you choose.
Nonprofits in the U.S. are established for the public good, with a mission to carry out fundraising efforts for charitable purposes. They rely on sponsorships, donations, and federal or government grants to operate. Some of them can also sell products and services.
Nonprofits in the U.S. come in all forms. Here are three of the most popular:
Public charities include hospitals, churches, schools, colleges and universities, and qualified medical research organisations affiliated with hospitals. These charities have an active fundraising program and can receive contributions from multiple sources, including private foundations, government agencies, corporations, other public charities, and the public.
A private foundation is an independent legal entity created solely for charitable purposes. A single individual, family, or corporation typically funds private foundations and receives a tax deduction for their donations. Some of the most well-known private foundations include the Make-A-Wish Foundation, the Susan G. Komen Foundation, and the Bill and Melinda Gates Foundation.
Private operating foundations are similar to private foundations, but have active programs similar to a public charity. Often, these foundations are considered a hybrid between the two and include places like libraries, museums, zoos, and research facilities.
U.S. nonprofits are tax exempt under the Internal Revenue Services’ (IRS) Internal Revenue Code section 501(c)(3), which uses the term “charitable organisations.” These organisations don’t pay federal income taxes on the funds they raise or on the payroll for employees. Gifts are also tax-deductible for donors.
To qualify for 501(c)(3) tax code status, a U.S. nonprofit must be incorporated as a legal entity at the state and federal levels. However, the required articles of incorporation vary from state to state.
Canada defines nonprofits as “associations, clubs, or societies that are not charities and are organised and operated exclusively for social welfare, civic improvement, pleasure, recreation, and any other purpose except profit.”
Interestingly enough, registered charities cannot be considered nonprofit organisations, even though they both operate on a nonprofit basis and are tax-exempt.
Non-charitable nonprofits include:
Community groups strive to improve social well-being in communities. Typically they have public purposes, like providing recreational activities and services that benefit their community. Some of these groups include the Ancient Forest Alliance, Black Lives Matter, and Fair Vote Canada.
Service groups consist of business professionals who promote community welfare and goodwill. They share many of the same attributes as community groups. However, they don’t exclusively focus on providing activities and services to the community.
Foreign entities are organisations that aren’t bound to a particular country. For example, Wikipedia is considered a foreign entity because it’s a free encyclopaedia that serves as an online educational resource.
Registered charities are exempt from paying income tax when filing tax returns. Nonprofits are “generally exempt” from paying income taxes, but they may be required to pay taxes on capital gains or property income.
The U.K. defines not-for-profit organisations as “organisations whose purpose is something other than to make private profit for directors, members, or shareholders.”
In addition to trusts, there are three main types of charity structures in the U.K.:
CIOs can hold property in their name. They can also enter contracts, and sue or get sued. Members of a CIO have limited liability while under the protection of a CIO. To achieve CIO status, you must be registered with the Charity Commission and send accounts and an annual return to the commission each year. You must also keep a member and trustee registry, and comply with charity law and other applicable legal requirements.
Like CIOs, charitable companies limited by guarantee have legal identities separate from their people. Individuals have almost total liability protection, can take or defend legal proceeds in the name of the charitable company, and can also buy and sell property in its name.
An unincorporated association is an “organisation set up through an agreement between a group of people who come together for a reason other than to make a profit.” Nonprofit unincorporated associations’ purpose is educational, scientific, and/or charitable in nature.
The Council of Foundations states that charities are exempt from “most forms of direct taxation.” They don’t pay taxes on grants, donations, or similar income sources. They also don’t pay taxes on rent or investment income.
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Here’s our complete list of who can and cannot use our platform.
As long as your organisation doesn’t support or contribute to anything on that list, it doesn’t matter where you are in the world or what type of structure your nonprofit has. Our all-in-one fundraising platform is free for your organisation to use when creating your next fundraising campaign. Ready to get started?
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