What is an NPO?

From NGOPedia

The terms NGO and NPO are often used interchangeably and sometimes incorrectly because there is a difference between the two in legal terms. In South Africa for example, once an NGO has been officially formed it can apply to the NPO Directorate within the National Department of Social Development to be registered as an NPO under the Non-Profit Organisations Act No 71 of 1997. An NPO number is assigned to it to signify that the organisation conforms to the appropriate legal requirements.

A non-profit organisation can be incorporated as a trust, a company or any other formalised association. This entity is firstly established to serve the public in some manner and secondly any income or property it owns cannot be transferred to its members or office bearers except where they are paid for the work that they do.

Organisations that can apply for NPO status include NGOs, CBOs (community based organisations), FBOs (faith based organisations) or trade unions that are formally constituted or have any other founding document.

Why is NPO registration important?

Acquiring NPO status for an NGO is a significant qualification because it gives potential onors some assurances:

• Improves the credibility of the organisation because as an NPO it is accountable to a government body;
• Gives the organisation a formal definition;
• Helps to set and maintain standards of governance, accountability and transparency;
• Provides benefits such as tax incentives and funding opportunities.