What qualifies as a not-for-profit organisation?


I am torn between which type of company I should form for my new community venture. I have been doing music lessons part-time for a couple of years now. But now, some music teacher friends of mine and I would like to band together and start a proper music school. I have been advised by an accountant that the ideal company structure for our venture would be a limited by guarantee - but it seems like limited by guarantee companies can only be non-profits. What sort of companies actually qualify as a non-profit? For example, are there any prerequisites or characteristics that all nonprofits must adhere to?



A non-profit organisation is one which reinvests its surplus revenues to promote and achieve its non-profit aims, as opposed to distributing trading profits to the people who own it. The purpose and objectives of a nonprofit must be social, charitable or community-based.

A limited by guarantee company is most commonly used by non-profit organisations and charities because it does not have shares or shareholders, so there is no requirement to give any ‘profit’ to the company’s members.

Take a look at this useful guide on starting a social enterprise.

2 years ago

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