Generally, when people hear that a company is a non-profit, they assume the organization is only for the benefit of others. Unfortunately, this is not always true. Many unscrupulous financial organizations realize that the perception of a non-profit is one of good and caring. Therefore, they will purposefully set up their organization as one, just to further swindle you.
Of course, this does not mean that all non-profit financial companies are scams, just that you need to be as cautious even if the organization is a non-profit one. Certainly, the non-profit organization, Consumer Credit Counseling Services, is a fine example of a good and legitimate non-profit financial business.
A non-profit organization can still charge fees and still pay their executives large salaries. The way a non-profit business is created is different, but it doesn’t prevent them from “making money.”
An incorporated non-profit acts very much like any other business. They can collect money, have a bank account, and pay for goods and services. One difference is in how they manage their business. They must have a board of directors instead of one individual. Not all non-profits are tax exempt. They have to apply for that status with the IRS.
Profit is a technical accounting term. A non-profit can still make money and pay salaries. The main difference has to do with what the surplus money an organization receives that better defines a non-profit vs. a for-profit business. Typically, non-profits are under more scrutiny than a for-profit business and the laws are different from state to state.
The main issue concerning non-profits is what they do with their surplus income. In most cases, it simply must go back to the organization… instead of into the pockets of the owners.
It is important to understand that a non-profit business can make money and can still pay their employees. If you feel a financial advisor or credit counselor is more on your side because they are a nonprofit… that is a false misconception. It is better to evaluate the financial organizations you hire with a different standard than just their tax or profit status.
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