A non-profit organization (NPO) is an organization that does not have profit extraction as its main goal and does not distribute the profit gained among the participants. They can be created to achieve social, charitable, cultural, educational, political, and scientific purposes. NPO’s managerial goals are focused in the areas of protecting the health of citizens, developing culture, and meeting the spiritual and other intangible needs of citizens. In addition, non-profit organizations can be involved in protecting the rights and legitimate interests of citizens and organizations, resolving disputes and conflicts, providing legal assistance, as well as for other purposes aimed at achieving public benefits.
Non-profit organizations are usually entitled to engage in entrepreneurial activity only if this activity is aimed at solving the problems of the population. The primary examples of NPOs are Amnesty International, Boy Scouts, Red Cross, Rotatory Foundation, UNESCO, American Heart Association, and Khan Academy. The reason is that these organizations do not seek and earn profit from selling their products or services, and the main source of income are various charities and contributions from other entities. In case of American Heart Association, the given institution employs more than 3400 people, whose salaries come from direct donations and funds, which are done by either government or people.
However, Honda, Microsoft, Google, Cargill, Samsung, Nokia, Apple, and Toyota are examples of commercial or for-profit organizations, which are incentivized to seek financial gains by selling their services or products to the consumers. They can raise money by selling stocks or direct profits from sales. For instance, Microsoft’s revenue primarily comes from software products, which sustains its operational expenses. In addition, numerous investors, who purchase stocks of the company, can be considered as another source of financial inflow. Therefore, both NPO and commercial organizations require money to be able to operate, however, its origin and incentives are different.