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Non-Profit Organisation (NPO) Equals Charity?
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Non-Profit Organisation (NPO) Equals Charity?
Published: 15 Feb 2018
Speaking of setting up a Non-Profit Organisation, the word ‘Charity’ usually pops up in the conversation. I have come across many clients who have confusion between these two terms, and are not sure where to begin. Let me explain further in this blog and answer the questions you might be having!
What Exactly Is NPO?
My clients always come to me and ask, what is NPO, is it necessary to be a Charity?
I will usually shake my head and say Non Profit Organisation a.k.a. NPO, is generally an organisation that is created not to attain monetary achievement, which means their ultimate purpose is NOT to generate additional revenue. NPO can serve many different purposes, some for recreational like sports interest or hobby; some for socializing / networking like premium coffee tasting for a group of tasteful people to share coffee knowledge and gather together; and some for serving the community.
In HK, there are 2 mainstreams of NPO, let me explain to you further:-
A) Limited by Guarantee: It needs to be registered through HK Companies Registry & Inland Revenue Department (IRD). This type of entity is mainly for recreational purpose or socializing purpose, for example, Football or Rugby League Association.
B) Charitable Organisation: It is also needed to be registered through HK Companies Registry & Inland Revenue Department, with the aim that is exclusively charitable. I can give you a very brief idea about this: we would help the client set up the Limited by Guarantee first, and then apply for the Charity status through the Inland Revenue Department. The purposes must be served under the following 4 categories:-
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes of charitable nature that serve and beneficial to the HK Community.
Why Would You Want to Set up a NPO?
First of all, let me put this straight, not every person would need a NPO for their business as this is not profit making. But having a NPO is more like a pet project or treating a hobby seriously, something you always wish to do but just have no idea where to start with. For instance, I am a huge football fan, having a football association would actually mean a lot for me as this is my hobby and I could formalize it and recruit members into it, and be able to arrange some friendly matches or gathering time to time.
In the meantime I am also a dog-lover, which means I am extremely keen on creating a Charity for helping those homeless pets. People on one side would love to reach or achieve a great result on becoming a billionaire yet at the same time that person would also want to do something that he always want to do when he was a kid.
Think of having a profitable organization is like the need for reputation and achievement, while having a non-profit is to fulfill the needs for affiliation and networking. One way or another, you would want one of them or maybe both.
Now you see a NPO includes all sorts of organisation that does not look for monetary outcome but it could be as simple as practicing something that you are really interested in with a group of like-minded people and take it into the next stage, to spread it out; or just doing good for the community without any profits in return (of course you can still collect fees from your members just that all revenues will be used for the organisation’s expenses).
FAQs on Establishing a NPO
>> Can Every Company Secretary Service Provider Help to Set up a NPO?
Yes, a normal company secretary service provider can help in forming a NPO, yet please ensure they have such experience before on dealing with different kinds of NPO setup especially with my introduction up in point 1 (types such as Limited by Guarantee and Charitable Organisation). But why would you need to look for the outsider while we, BRIDGES can assist you with the NPO setup in the most reliable way with our years of experience in handling different cases and accumulating the know-how.
>> Can Every NPO Be Tax Exempted?
Not really, as setting up the Charitable Organisation needs to go through an application process of tax exemption, and after getting the approval from the IRD, the charitable status can then be granted and you can start to receive donations.
>> Can Every NPO Accept Donations?
Not every NPO can accept donations, only Charitable Organisation can accept donations from the public.
>> What Happen If I Still Have a Bunch of Questions?
BRIDGES can provide you with a FREE professional consultation session on NPO setup, thus your queries can be addressed and cleared with our preceding case studies and experience sharing. Please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to arrange the appointment convenient for you. Or if you’d like to ask something instantly via live chat, simply drop me a private message, I will be more than happy to walk you through the process and give you my prompt answers.
In the next article we will cover a common question raised among our clients - the difference between a Limited by Guarantee and a Limited by Shares, stay tuned!
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