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What Is Non-Profit Law?

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  • Written By: Felicia Dye
  • Edited By: O. Wallace
  • Last Modified Date: 14 March 2014
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Non-profit law refers to the legislation that regulates certain organizations. This legislation may outline the requirements for establishing a non-profit organization, such as name registration and filing certain documents. The law usually outlines special tax conditions which commonly include regulations of how the business handles certain transactions, such as receiving funds from donors. There are some instances where businesses are subject to two sets of non-profit law.

Most businesses exist and are driven by their goal to earn money, making them profitable organizations. A non-profit organization is a business that exists for another reason, such as to help people. Examples of these organizations include churches and charities. Since these organizations operate in governed societies and they conduct business transactions, they are also subject to regulations, which are sometimes referred to as non-profit law.

This legislation can cover the full spectrum of a non-profit organization's operations. Non-profit law commonly outlines the standards that must be met for a business to be granted this special status. For example, it is common for one of the first requirements to be the official registration of the business' name. Among the requirements may be a demand that such businesses explicitly outline their purposes and provide certain details about the organization in document that is filed with a government agency. There is also legislation in some jurisdictions that require such businesses to outline regulations for themselves known as bylaws.

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A non-profit organization is commonly subject to tax regulations that differ from those of other businesses. Since non-profits are generally exempt from paying taxes, this is commonly one of the most significant areas of non-profit law. This legislation may dictate how a business interacts with the government and it will likely govern how the business interacts with others when receiving and managing money. A major focus of this area of the law is the relationship between these organizations and their donors. This portion of non-profit law is prioritized because there is ample opportunity for individuals to take advantage of the system by cheating the government out of money.

Non-profit organizations may be subject to legislation from two jurisdictions. Consider, for example, a non-governmental organization (NGO) that provides education to girls in third world countries. If that business is incorporated in the US, there are certain US non-profit laws must be followed, but that business is also likely to be subject to the laws in every country where it operates.

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