Not for Profit vs Nonprofit: Everything You Need to Know
Not for profit vs non-profit are types of organizations that are operated with the intention to raise money or awareness.4 min read
Not For Profit Vs Non-Profit
Not for profit vs non-profit are types of organizations that are operated with the intention to raise money or awareness to aid a particular cause or group, rather than to attain profit and money for the business’ shareholders. Sometimes the two names are used interchangeably, but there are differences.
Difference Between Not for Profit and Non-Profit Organizations
Numerous organizations operate without the goal of making a profit to satisfy shareholders and company owners. Not-for-profit and non-profit companies are similar in the respect that both of them work with the purpose of using the income that they generate to help those in need.
Notable Factors of Not For Profit Companies:
Those working at the company are not paid
May include an income roster that does directly benefit from the company’s income
Less common than non-profit.
If you are writing in a setting that is professional or academic in nature, and you place higher value on accuracy rather than familiarity, then you should choose not-for profit.
Not for profit companies are often set up for the welfare of the society and may provide assistance and advice to the general public, or a specific demographic.
Not for profit companies could be charities, hospitals, religious groups, clubs, trade unions, welfare societies, and other similar organizations.
Provide local communities with helpful services.
Typically smaller than a non-profit company.
Notable Factors of Non-Profit Companies:
May have employees that get paid a salary, but the salary does not come from the company’s fundraising work.
May also hire volunteers, but these simply do not benefit from the company’s income.
If you are writing for an audience that would not be interested in the nuances of not for profit finance, non-profit could be more suitable.
These types of companies are generally a group of people that have organized themselves with an objective that is not making a profit. For example, non-profits want to promote cultural, educational or religious beliefs and objectives.
Typically larger than a not for profit company.
Non-profit companies can qualify for tax-free fundraising because their income supports and sustains their services as compared to for profit companies who provide a corporate service with the intention of the transaction being profitable.
Salaries are generally lower than in private companies; however, there is a significant difference in pay scale as the individual progresses up the ladder.
Both sets of companies do not operate at a profit. They may actually make money from their various activities and fundraising initiatives; however this is either used for additional charity work or reinvested to further the company’s operations. No profits will be distributed to any members, directors, or trustees.
It may be interesting to note that a not for profit company can’t function as a non-profit company; however, a non-profit company can in fact operate as a not for profit organization. It is the role of The Internal Revenue Service to classify various types of organizations as non-profits and certain kinds of events or activities as not for profit.
Definition of a Non-Profit Organization
The term “non-profit” can be used as both a noun and an adjective. When used as a noun, the term is referring to an organization that does not operate with the purpose of monetary gain. When used as an adjective, it simply describes this type of organization.
Non-profit organizations are offered referred to as NGOs. They can be defined in simple terms as being organizations that work for any form of charitable purpose. This purpose may include (but is not limited to) promoting commerce, art, science or other areas. Non-profit organizations that are licensed under section 8 of the Indian Companies Act have limited liability and are granted tax-exemption by the Internal Revenue Service (IRS).
Employment taxes, in addition to federal and state rules affecting the workplace are generally the same for both non-profit and not for profit organizations.
In order to be classified as a non-profit, the organization but work to achieve the group objects of the company and its charitable purposes, as opposed to distributing any monies to its owners in the form of dividends.
Definition of a Not for Profit Organization
Like the non profit organization, a not for profit company is one which does not distribute profit to its owners and shareholders but instead invests them back into their business and its initiatives. Anybody who sees a need can establish a not for profit company in order to assist those around the world that require help.
The term works as both a noun and an adjective and works in the same manner as non-profits in both contexts.
Not for profit organizations can include clubs such as sports clubs and may of the initiatives started by these companies are fundraising events that aim to raise money for a particular cause. These fundraising efforts are still considered as “not for profit” even if the funds are then donated to a non-profit group.
Some not for profit organizations are given tax-exempt status under section 501(a) of the Internal Revenue Code; however, in order to obtain this, the company has to request 501(C)(3) from the US Inland Revenue Service (IRS). These companies also do not have to pay property or sales taxes.
A not for profit organization reinvests all of the money it has earned, raised, or received through donations back into the operation of the business and in assisting its causes.
If you are setting up a business and you are not sure whether it qualifies as being a not for profit or a non-profit organzation, then you can consult one of our lawyers for help and guidance. To do so, post your job on Upcounsel’s marketplace. UpCounsel only accepts the top 5% of lawyers to its site and they come from schools such as Harvard Law or Yale. Our lawyers have an average of 14 years of legal experience, and this includes working with prestigious companies like Google and Twilio. For up to date legal news, follow the UpCounsel blog.