Why are Not for Profit investments treated differently and why would they be more scrutinized when...

Why are Not for Profit investments treated differently and why would they be more scrutinized when compared to private companies?

Expert Solution

A Not for Profit investments refers to a company or an organization that does not distribute its surplus funds to owners or shareholders, and utilizes it to help pursue its goals. The government regulates such types of investments differently through taxes and other laws thus these are treated differently. Majority non-profit organizations fall under entities that are exempt from a numerous taxes for many reasons, for profit companies pay federal and state income taxes, sales and use taxes, and property taxes, and are usually charged under several other mandates.

The majority of non-profit organizations are further categorized as either a private foundation or a public charity. This categorization is imperative because different tax rules apply to the function of each. Deducting donations for a private organization is more limited than donations to a public charity. Furthermore, these are eligible to a multitude of private and government grants. Also laws restrict which fields of work non-profit investments are allowed, however for profit organizations have no such restrictions apart from basic legal restrictions. Due to these reasons these are more scrutinized when compared to private companies

ekkarill92 answered 1 year ago

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