A non-profit organization, also known as NPO, is an entity that is not allowed to distribute its extra or surplus income. This is as opposed to organizations that are for profit. For example, if an NPO earns more than it needs for salaries and other operating expenses, the surplus money has to be put back into the company – as additional capital for example. Alternatively, the money can be given to other NPOs or charitable organizations. Take note – for profit organizations can use this money as dividends for their shareholders. By default, NPOs cannot have shareholders or stockholders. This does not mean, however, that NPOs are exempt from paying taxes. They are also allowed to collect taxes on the services and products that they provide.
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