MYTHS

Myth #1

NONPROFITS CANNOT EARN A PROFIT.

Reality: The term "nonprofit" is a bit of a misnomer. Nonprofits can make a profit (and should try to have some level of positive revenue to build a reserve fund to ensure sustainability.) The key difference between nonprofits and for-profits is that a nonprofit organization cannot distribute its profits to any private individual (although nonprofits may pay reasonable compensation to those providing services). This prohibition against “private benefit” is because tax-exempt charitable nonprofits are formed to benefit the public, not private interests. For more information, see this IRS guidance. Learn about what charitable nonprofits need to do to maintain their tax-exempt status

Myth #2

A WELL RUN NONPROFIT SHOULD HAVE LOW OVERHEAD COSTS.

Operating costs, such as paying utility bills, rent, salaries, and investing in office equipment are referred to by a variety of names, including "overhead," "administrative costs," and "indirect costs." While the terminology varies, one thing does not: these costs are essential to delivering on a nonprofit's mission and have no relation to the level of effectiveness or the outcomes a charitable nonprofit may deliver.  

MYTH #3

NONPROFITS DON'T HAVE PAID STAFF, THEY ONLY USE VOLUNTEERS.

According to the Bureau of Labor Statistics, in 2012, nonprofits employed 11.4 million people - that's 10.3% of private employment in the United States!

MYTH #4

NONPROFITS CAN'T LOBBY.

Every charitable nonprofit can and should make its voice heard on issues that are important to its mission and to the people or cause the nonprofit serves. As advocates, nonprofits are sometimes required to speak up about policies, laws, and regulations; lobbying by nonprofits is permitted by law. However, tax-exempt charitable nonprofit organizations are NOT permitted to engage in partisan political activity, such as supporting or opposing any candidate for public office. 

MYTH #5

NONPROFITS GET MOST OF THEIR FUNDING FROM FOUNDATIONS.

Foundation grants represent only a small part of the total amount of dollars contributed each year to the charitable nonprofit community. Private philanthropy, which includes both donations from individuals and grants from private and corporate foundations, represents only 12.3% of the total annual revenue to the charitable nonprofit community, and of that, the majority is from contributions from individuals. 

MYTH #6

NONPROFITS GET MOST OF THEIR FUNDING FROM FOUNDATIONS.

Foundation grants represent only a small part of the total amount of dollars contributed each year to the charitable nonprofit community. Private philanthropy, which includes both donations from individuals and grants from private and corporate foundations, represents only 12.3% of the total annual revenue to the charitable nonprofit community, and of that, the majority is from contributions from individuals. 

For more myths visit the National Council of Nonprofits !

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