(a)What is a not-for-profit making organization? (b) Outline two differences between a for-profit organization and a not-for-profit making organisation. (c)...

(a)What is a not-for-profit making organization?

(b) Outline two differences between a for-profit organization and a not-for-profit making organisation.

(c) Explain the following sources of funding in a not-for-profit making organisation:
i. subscription
ii. life membership fee
iii.  entrance fee
iv. donation

Answer Details

a) A not-for-profit making organization, also known as a non-profit organization, is an entity that operates for a specific purpose, such as a charitable, educational, religious, or social cause, rather than for generating profits. Their goal is to fulfill their mission, not to make money.

b) Two differences between a for-profit organization and a not-for-profit organization are:

• Profit orientation: For-profit organizations aim to generate profits for their owners or shareholders, while not-for-profit organizations do not distribute any profits to their members or stakeholders. Instead, they reinvest their resources in furthering their mission and improving their programs and services.
• Legal structure: For-profit organizations are usually structured as corporations, limited liability companies (LLCs), or partnerships, while not-for-profit organizations are structured as non-profit corporations or charitable trusts. This difference affects their legal and tax status, as well as their governance and accountability mechanisms.

c) The sources of funding in a not-for-profit making organisation are:

• Subscription: A subscription is a regular payment made by members of an organization to support its activities and receive certain benefits, such as access to events, publications, or services. For example, a museum may offer annual memberships to visitors who want to support its exhibitions and education programs.
• Life membership fee: A life membership fee is a one-time payment made by members of an organization to become permanent members and enjoy ongoing benefits, such as voting rights or discounts on products or services. For example, a professional association may offer life memberships to its members who want to support its advocacy and networking activities.
• Entrance fee: An entrance fee is a one-time payment made by new members of an organization to cover the administrative costs of processing their applications and providing them with orientation and materials. For example, a sports club may charge an entrance fee to new members who want to join its teams and use its facilities.
• Donation: A donation is a voluntary contribution made by individuals, foundations, corporations, or government agencies to support the mission and programs of a not-for-profit organization. Donations can be of any amount and can be used for a specific purpose, such as funding a scholarship or a research project, or for general operating support. Donors may choose to support a not-for-profit organization based on their alignment with its mission and values.