Building a nonprofit organization can bring many benefits to numerous individuals and communities. As an organization in itself, there are also tremendous benefits of running a nonprofit. Thus, with all the advantages it brings also come with several disadvantages. Among these advantages and disadvantages are the following:
1. Tax exemption
Unlike many for-profit businesses, nonprofits are exempted from taxes, which is a huge relief from an organization who relies mainly on donations and grants.
2. Eligibility to apply for grants
Applying for grants, most of the time will be exclusive to nonprofit organizations, which for-profit organizations will be unable to attain. Furthermore, many philanthropic foundations have also been very focused in helping nonprofits attain many of their initiatives by providing numerous funds.
Although a nonprofit gets to enjoy benefits, it is still recognized as an organization with a formal structure. This means that employees still get to experience the same amount of benefits as those who work under for-profit organizations.
4. Fewer liabilities
Being a member of the board brings prestige to a person’s title, alongside big responsibilities. Apart from that, they are also put in a very risky position. They are liable for many debts as their names are in most of the papers. Hence, for nonprofits, the case will not be the same. The board of directors, alongside all employees, are safe. Thus, this doesn’t mean that employees who do things based on their personal interest and possibly harming the organization are safe as well.
A for-profit business will require capital to begin operations and nonprofits are not exempted from that. Before achieving tax exemption, certain fees need to be paid which the founder will normally shoulder. In some occasions, philanthropists who give to individuals decide to sponsor startup nonprofits before the organization even begins to start operations. Also, sometimes an additional cost could be the hiring of accountants, lawyers, or consultants.
Given that nonprofits would like to get exempted from taxes, governments do not simply approve of their requests. Thus, a long process takes place. Through this process, loads of time and manpower is needed of an NGO, which can be costly for organizations who do not work for profit.
Often times, a co-owned or merged business can be difficult to manage given the differences in opinions with regards to decision-making matters. Having many differences when it comes to decisions will cause an incredible amount of conflict. For an NGO, having sole control in decision making is next to impossible. There are many rules and regulations NGOs need to abide with in order to be recognized, apart from their own bylaws, where in some cases the possibility of sole control will not be permitted.
4. Subject to public scrutiny
For NGOs and nonprofits, they are considered to be public interests and therefore have to present everything to the public. To hide things such as finances will not be tolerated and the public can easily question in case necessary expenses were made.
Running an NGO is no easy task, which comes with lots of hard work and many complications. Philanthropic organizations will not always be around to provide aid and support to your organization. Many other disadvantages and difficulties also need to be dealt with accordingly to succeed in the causes your NGO plans to support. Ultimately, an NGOs goals and initiatives can be implemented successfully by consistently abiding by the rules and dealing with the disadvantages properly.