Fraternal Benefit Society has each of the following characteristics EXCEPT Incorporated without capital stock, For profit, Exist for the benefit of its members.
The Correct Answer and Explanation is:
Correct Answer: For profit
Explanation
A Fraternal Benefit Society is a type of organization that offers insurance and other benefits to its members, typically based on a common bond such as religion, ethnicity, occupation, or shared values. These societies are unique in structure and purpose compared to traditional insurance companies or business corporations.
Fraternal Benefit Societies possess several key characteristics:
- Incorporated without capital stock: These organizations are not-for-profit entities and do not issue shares of stock like a traditional corporation. Their structure emphasizes mutual support and communal benefit rather than investor profit.
- Exist for the benefit of their members: A core principle of fraternal organizations is that they operate to serve the interests and welfare of their members. This includes providing life insurance, health insurance, annuities, and other financial products, as well as community support programs, scholarships, and charitable activities.
- Operate through a lodge system: Many fraternal societies are organized into local chapters or lodges that facilitate governance, community involvement, and social connection among members.
The statement “For profit” does not apply to Fraternal Benefit Societies. These organizations are specifically designed to be nonprofit. Their revenues are used to fund member benefits and support their communal missions, not to generate profits for shareholders or owners. While they may offer insurance and financial products, any surplus earnings are reinvested into the society or used to lower member costs—not distributed as profit.
Being nonprofit is a defining legal and operational characteristic of fraternal societies, and it is this quality that often allows them to receive certain tax exemptions under the Internal Revenue Code (specifically Section 501(c)(8) in the U.S.).
In summary, while Fraternal Benefit Societies share some operational aspects with businesses, their fundamental nonprofit nature distinguishes them from for-profit corporations.
