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| *Ostroff, Fair and Company>>>Government & Non-Profit |
Is it possible to have shareholders in a non-profit organization? What are the legalities? |
Is it possible to have shareholders in a non-profit organization? What are the legalities? There is no ownership of a non-profit. No shareholders, no partners, no entrepenuers. The legalities are many. You're welcome to ask more here, or go through my avatar to ask me directly. ^ Not 'shareholders' in the stockmarket sense of the term, but if it's a member-based organisation, then all members are effectively shareholders. It all hinges on the legal status of the organisation - and for non-profits there's obviously no member (or 'shareholder') dividends...because there's no profit. Legals: Members are financially liable if the organisation is not incorporated (which is seldom the case). There are very strict laws that prevent any income that is generated being disbursed to individuals (beyond wages and expenses, of course!). You'll need to check out your local 'incorporated associations' laws. Also see your local taxation laws regarding charitable organisations (if that's what your org is...there's a difference between non-profit and charitable - can be both, but not necessarily). Rainbow (post that follows) - clearly it depends on jurisdiction because 'stakeholder' means something enitrely different here (in Aust)...referring broadly to individuals/groups that have a 'stake' in the issue at hand (could be members, clients, funders, partnership orgs etc). 'Shareholder' is often used here in place of 'member' - eg I am officially a 'shareholder', but colloquially a 'member'' of my credit union which is non-profit...usually depends on the sector the non-profit is operating in re terminology used. Role and authority of 'shareholders' DOES come down to legal status of the org (here at least), rather than the term 'shareholders' having an intrinsic meaning associated with a market, for-profit enterprise. Asker - it's really important that you know your local laws and conventions. I'm senior non-profit management, and Board member of several non-profits. Undertaking PhD in non-profit governance. not shareholders but stakeholders Stakeholders may be donors, members, constituents, clients, and or people positively affected by the organization. Stakeholders are, in a sense, "vested" in the mission of the non-profit organization. Their return on investment comes through the successful implementation of the mission. Now, you can have personal lenders, but these individual are the same as a "creditor", even if the terms of their loans to the non-profit are more favorable than a conventional lender. Many community development loan funds work on this basis. Because of the tax preference granted by the IRS, their can be no shareholders receiving an equity share in the organization. Many Non-Profit housing development organizations form limited partnerships to develop projects that receive an allocation of tax-credits that can be distributed to investors, but these limited partnerships are not non-profit entities. non-profit management and community development consultant |
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