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Business basics: Who owns a non-profit? No one

By Eamonn Ryan

 

One of the best ways for a non-profit organization to ensure its survival is to run its charitable activities ‘like a business’, so as not to be solely reliant on donations or membership subscriptions. PIRB has been at the forefront of this global NPO trend, but a downside is that it can be so successful that people mistake it for a for-profit company.

It is consequently important that plumbers do not mistake successful fund-raising activities with profit making. However, a quick search of the website of the Companies and Intellectual Property Commission, a division of the DTI, will show anyone that PIRB is a non-profit organization.

To clear up any potential misunderstanding, it is necessary to understand how an NPO like PIRB differs from a private company. The difference lies in ownership – an NPO cannot be owned by any person or group of people. NPOs consequently do not have private owners, do not issue company shares and do not pay out dividends or profit. However, they can earn a surplus that is typically reinvested back into its mandated charitable mission – in PIRB’s case, the plumbing industry. Surplus income, and any assets or property, cannot be distributed directly or indirectly to persons or employees except as reasonable remuneration for goods delivered or services provided to the company, or as reimbursement for expenses incurred in advancing the NPO’s objectives.

If there is no owner, but is a separate legal entity, then who manages and controls a non-profit like PIRB? Non-profits are managed by boards, and when they first begin operating, the board members, along with the founder(s), may perform many of the tasks of the organisation until they begin hiring staff members to develop and lead programmes. But none of these individuals or groups have any ownership rights in the organisation.

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