Non-profit = the good guys!?

Posted on January 15, 2012 by

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In this post I am going to present the results of my research about non-profit organizations and for-profit organizations and their differences. If we hear the term “non-profit-organization”, that sounds pretty good to us, doesn’t it? Seems like they don’t care about the money and just want to do good! How nice. According to ourcommunity.com.au in fact many people see the for-profit and non-profit sectors in value-based terms, with for-profit organisations being driven by the pursuit of money and not-for-profit organisations existing to contribute something to the society or the community.

What is the formal difference?

In the US, non-profit-organisations have to fulfil some criteria in order to be granted a non-profit status (501c3). The idea or services of the organisatiom have to be beneficial for the society in some kind of way, but the explicit criteria differ from country to country.

In some countries, non-profits may apply for tax-exempt status in order to be exempt from income tax and other taxes. In the US, to be exempt from federal income taxes the organisation must meet the requirements set forth by the Internal Revenue Service.

Profit for both sides!?

Non-profit organisations may also generate profits; so to say make more money than they spend. But in comparison to for-profits, the money has to stay within the company and no surpluses can be distributed to the members. The idea is to rather achieve organisational goals with it than to distribute it as profits or dividends.

That means that in the case of CouchSurfing Mr Fenton now has a big amount of shares on his disposal and the decision what to do with the money lies with him. But why is it a bad thing!?

Good for him to have shares of that big amount, good for us to be able to use CS for free and profit from its revised design.

As well I think Matthias is right in saying in his comment on Nicos blog post that we could see a development like this many times before. Innovations starting as non-profits, becoming famous and thereby coming to power and that is when investors come into play. And why saying no!?

Keeping it real

I think there are very different opinions on that topic. The more I read about it, the more I tend to say there is nothing wrong about turning into a for-profit in the case of CouchSurfing, as long as the founder and guys in the high positions stay true. True to their mission and true to their members. Gaining lots of power and becoming rich might be an incentive to think of how to generate even more profits and thereby forget about the initial idea. And of course if the organisation accepts investments, interdependencies with the investors are developed, so they might be influenced in their decision making by the investor’s personal interests. This is also discussed in a blog entry on techcrunch.com. In fact, things are likely to change – but not necessarily. Members can just hope that CouchSurfing will not turn into a site full of advertisements and in the future will still be focused on networking and connecting people from all over the world. 

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