What is not-for-profit Organization?
Posted by admin on November 4, 2009 - (0)
A nonprofit organization is an organization which is formed for purposes other than for purposes other than generating profit. Its primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes. Nonprofits may be involved in an innumerable range of areas relating to the arts, charities, education, politics, religion, research, or some other endeavor.
These organizations are governed by laws which are country specific. Nonprofit organizations generally do not operate to generate profit, a characteristic widely considered to be the defining characteristic of such organizations. However, a nonprofit organization may accept, hold and disburse money and other things of value
Both nonprofit and for-profit entities must have board members, steering committee members, or trustees who owe the organization a fiduciary duty of loyalty and trust. In the United States, nonprofit organizations normally are formed by incorporating in the state in which they expect to do business.
It may also be a trust or association of members or a delegate structure to allow for the representation of groups or corporations as members. Alternately, it may be a non-membership organization and the board of directors may elect its own successors.
However, a primary difference between a nonprofit and a for-profit corporation is that a nonprofit does not issue stock or pay dividends, (for example, The Code of the Commonwealth of Virginia includes the Non-Stock Corporation Act that is used to incorporate nonprofit entities) and may not enrich its directors. Although like for-profit corporations, nonprofits may still have employees and can compensate their directors within reasonable bounds.
Among the major examples for non profit organizations are the Bill and Melinda Gates Foundation, Howard Hughes Medical Institute and others.
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What are Cooperatives?
Posted by admin on November 4, 2009 - (0)
Cooperative form another category of business structure among the different types of business structure. A cooperative is a group of persons who join together or co-operate, to carry on an economic activity of mutual benefit. Mutual benefit among the members of the co-operative is the key and establishing characteristic of cooperative.
Generally, a cooperative comprises a legal entity owned and democratically controlled by its members. Membership is open, implying that anyone who satisfies certain non-discriminatory conditions may join. However, most cooperatives are governed on a strict “one member, one vote” basis, to avoid the concentration of control in an elite. Economic benefits are distributed proportionally according to each member’s level of economic interest in the cooperative, for instance by a dividend on sales or purchases. So, if you intend your business to take a form where all the members involved get an equal share of the profit then cooperative is the answer!
Cooperatives could be classified as either consumer or producer cooperatives, depending largely on the mutual interest that their membership shares. Classification is also often based on their function or trade sector. For example, a group of services in a neighborhood dealing with dairy products could form a cooperative. ‘Sameness’ in the nature of the activity carried out is one of the key that determines the formation of a cooperative.
Worldwide, some 800 million people are members of cooperatives, and it is estimated that cooperatives employ some 100 million people.
There are several kinds of co-operatives which exist, some of them are:
1. Worker cooperative
Worker cooperatives are wholly owned and democratically controlled by its “worker-owners”. This implies that the employees as well as the employers in this setup are workers.
2. Agricultural cooperative
Such entities are widespread in rural areas. In this kind of structure, people with business pertaining to agriculture can come together and set up a cooperative. This leads to cutting down of risks and ensures a minimum amount with regard to profits. In the United States, there are both marketing and supply cooperatives.
So, based on your need and objective behind setting up a business, you could choose if needs to be a co-operative, sole proprietorship or corporation.
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What is Incorporation?
Posted by admin on November 4, 2009 - (0)
Say, you started a business on a small scale and now want to scale up or you wish to start a startup on a large scale, then incorporation is the answer Incorporation (abbreviated Inc. in U.S. business names) is the forming of a new corporation. The corporation may be a business, a non-profit organization or even a government of a new city or town.
Corporations are large firms and are generally have a good safety net. Well, corporation, may create an image of something big and unmanageable in your mind. But then there are several advantages which corporations enjoy, some of them are:
1. Legal benefits
A corporation enjoys several benefits such as protection of personal assets, and safeguarding personal assets against the claims of creditors and lawsuits. Small scale businesses operators, sole proprietors and general partners in a partnership are personally and jointly responsible for all the liabilities of a business such as loans, accounts payable, and legal judgments, something which corporations do away without.
2. Transferable ownership
Ownership in a corporation or LLC is easily transferable to others, either in whole or in part which may not be the case in sole proprietorship or partnership
3. Retirement funds
Retirement funds and qualified retirement plans (like 401ks) may be set up more easily with a corporation. These retirement funds not only safeguard your future but also give you the option to raise capital during the time of need.
4. Taxation
Among the major benefits that corporations allow, one pertains to taxation. Different countries have different laws to define the taxation norms for corporations. For example, in the United States, corporations are taxed at a lower rate than individuals
5. Raising funds through sale of stock.
Corporations bring with them tags such as credibility and dependability which entails them several luxuries such as capital from investors. They may raise capital through the sale of stock easily.
Thus one should not solely look at the disadvantages in terms of size for there exists several advantages in forming a corporation.
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