Question

Many healthcare organizations are non-profit organizations. Does this means that they do not need to earn a profit? Explain

Answer 1

The sole purpose of any business organization is to earn profit. In other words, they work for self-interest. However, there are some organizations whose basic aim is to serve the society i.e. they work for the benefit of the society as a whole. These are called not-for-profit organizations or nonprofit organizations.

But they also earn profit via many activities but not for Owner's for wellfare of society

Although being termed as non-profit, these corporations can make money. But these profits made cannot be used by the owners or shareholders of the organization. Instead, this surplus money is used for charitable, educational, scientific and religious purposes. This is the reason why these organizations are tax exempted by the government. However, there are instances when this profit is subjected to tax and is dependent on how the profit was generated- either by “related” or “unrelated” activities. So, when the profit made is due to “unrelated activities’ then it is not tax exempted.