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Advantages and Disadvantages of Becoming a Non-Profit Organization

Not just any company can become a non-profit organization (NPO). Non-profit status is limited to organizations that generally serve the community in a sector like education, religion, charity, science, arts, etc. The government grants a non-profit organization tax-exempt status because the shareholders or trustees work with the organization without financial compensation. All money that is earned should be used by the NPO for its operations. Keep in mind that accounting for non-profits should be miticulous. Using special software like abila mip advance can make the process much easier. Let’s look at some advantages and disadvantages of becoming an NPO.


Tax Exempt: We mentioned this briefly above. It simply means that under the IRS code 501(C)(3) the NPO does not have to pay and state or local taxes. Additionally, any donations the non-profit receives are tax-exempt.

Grant Funding: Non-profit organizations can receive additional funding from the government.

Volunteers: There are lots of people who enjoy volunteering their time with an organization they believe in. Volunteers are there working with an NPO because they want to be not because they expect compensation. They bring their skills and their passion to work for the good of the cause.


Investment: Not only does it take a huge investment of time and energy to start an NPO, but it also takes financial resources. You will likely need to hire an accountant and an attorney to make sure you are structuring the NPO correctly and obtaining the required licenses and exemptions. There are fees associated with incorporation and tax exemption.

Detailed Records: If organization is not your forte, you will need to find someone to help you. Detailed and accurate record-keeping is required for annual filings with your state and the IRS. You will need to reapply each year to keep your status active.

Tight Budgets: As the name implies, a non-profit will usually run on a very tight budget. Paid employees will exist in addition to volunteers and they will need to be paid. It can be difficult to get the help you need when you don’t have the funds to back you up.