Nonprofit Organization - Legal Aspects

Legal Aspects

NPOs have a wide diversity of structures and purposes. For legal classification, there are, nevertheless, some elements of importance:

• Economic activity.
• Supervision and management provisions.
• Representation.
• Accountability and auditing provisions.
• Provisions for the amendment of the statutes or articles of incorporation.
• Provisions for the dissolution of the entity.
• Tax status of corporate and private donors.
• Tax status of the foundation.

Some of the above must be, in most jurisdictions, expressed in the charter of establishment. Others may be provided by the supervising authority at each particular jurisdiction.

While affiliations will not affect a legal status, they may be taken into consideration by legal proceedings as an indication of purpose.

Most countries have laws which regulate the establishment and management of NPOs, and which require compliance with corporate governance regimes. Most larger organizations are required to publish their financial reports detailing their income and expenditure publicly. In many aspects they are similar to corporate business entities though there are often significant differences. Both not-for-profit and for-profit corporate entities must have board members, steering committee members, or trustees who owe the organization a fiduciary duty of loyalty and trust. A notable exception to this involves churches, which are often not required to disclose finances to anyone, including church members.