BUS101: Introduction to Business
Study guide and Definitions
Unit 1: The Context of Business
1.1 Business Basics
Section 6: The Role of the Nonprofit
Nonprofits play a vital role in society by focusing resources and providing services to
community needs without regard to profit.
Learning Objectives
● Identify the role of nonprofits in society
● Outline the characteristics of a nonprofit
Key Points
● While NPOs are permitted to generate surplus revenues, these revenues must be
retained by the organization for its self-preservation, expansion, or plans.
● Some NPOs may also be charity or service organizations. They may be organized
as corporations, trusts, or cooperatives; or they may exist informally.
● Both NPOs 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.
● NPOs have controlling members or boards. Many have paid staff including
management, while others employ unpaid volunteers and even executives who
work with or without compensation (occasionally nominal).
Terms
● Fiduciary
-Related to trusts and trustees.
● Jurisdiction
- The limits or territory within which authority may be exercised.
● Dividend
- A pro rata payment of money by a company to its shareholders, usually made
periodically (e.g., quarterly or annually).
Nonprofits Defined
- A nonprofit organization (NPO) does not distribute profits or dividends. Instead it retains
any earnings or surplus revenues to achieve its goals. An organization is deemed
eligible for nonprofit status under US Internal Revenue Code Section 501(c).
- While nonprofit organizations are permitted to generate surplus revenues, these
revenues must be retained by the organization for its self-preservation, expansion, or
plans. NPOs have controlling members or boards. Many have paid staff, including
management, while others employ unpaid volunteers and even executives who work
Study guide and Definitions
Unit 1: The Context of Business
1.1 Business Basics
Section 6: The Role of the Nonprofit
Nonprofits play a vital role in society by focusing resources and providing services to
community needs without regard to profit.
Learning Objectives
● Identify the role of nonprofits in society
● Outline the characteristics of a nonprofit
Key Points
● While NPOs are permitted to generate surplus revenues, these revenues must be
retained by the organization for its self-preservation, expansion, or plans.
● Some NPOs may also be charity or service organizations. They may be organized
as corporations, trusts, or cooperatives; or they may exist informally.
● Both NPOs 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.
● NPOs have controlling members or boards. Many have paid staff including
management, while others employ unpaid volunteers and even executives who
work with or without compensation (occasionally nominal).
Terms
● Fiduciary
-Related to trusts and trustees.
● Jurisdiction
- The limits or territory within which authority may be exercised.
● Dividend
- A pro rata payment of money by a company to its shareholders, usually made
periodically (e.g., quarterly or annually).
Nonprofits Defined
- A nonprofit organization (NPO) does not distribute profits or dividends. Instead it retains
any earnings or surplus revenues to achieve its goals. An organization is deemed
eligible for nonprofit status under US Internal Revenue Code Section 501(c).
- While nonprofit organizations are permitted to generate surplus revenues, these
revenues must be retained by the organization for its self-preservation, expansion, or
plans. NPOs have controlling members or boards. Many have paid staff, including
management, while others employ unpaid volunteers and even executives who work
