The Difference Between a Non-Profit and a Not-for-Profit Organization
Introduction
Non-profit and not-for-profit organizations are frequently confused, and people often use the terms interchangeably. However, there is a difference between these two types of organizations, and it is essential to understand the distinction before choosing which type of organization to create or support.
What is a Non-Profit Organization?
A non-profit organization is a type of tax-exempt organization that is established for charitable, educational, scientific, religious or other purposes. The primary objective of a non-profit organization is not to make a profit but to carry out its mission for the benefit of society. Non-profit organizations can generate revenue, but the money must be used to further the organization’s goals rather than to benefit its members or shareholders. Non-profits are typically exempt from paying some taxes, and their donors may be eligible for a tax deduction.
What is a Not-for-Profit Organization?
A not-for-profit organization is similar to a non-profit organization. It is established to serve a purpose other than to make a profit, and any money earned must be used to further the organization’s mission. Not-for-profits can be organized for many purposes, including charitable, educational, scientific, and religious purposes. Like non-profits, not-for-profits are also exempt from paying some taxes, and their donors may be eligible for a tax deduction.
The Key Differences Between Non-Profits and Not-for-Profits
One of the key differences between non-profits and not-for-profits is the way they are run. Non-profit organizations are typically run by a board of directors, who are responsible for overseeing the organization’s operations and ensuring that it remains true to its mission. Not-for-profit organizations, on the other hand, can be run by a board of directors or by its members, who are responsible for making decisions about the organization’s operations.
Another significant difference is that non-profits have a specific legal status, which is granted by the Internal Revenue Service. Not-for-profits, however, do not have a legal status but can operate as a non-profit organization.
Lastly, there is a distinction between the terms “non-profit” and “not-for-profit,” with non-profit being the more commonly used term. Non-profit organizations may be more prevalent and have a higher profile than not-for-profit organizations.
Conclusion
In summary, while the terms non-profit and not-for-profit organizations are frequently used interchangeably, there are some differences between the two. Understanding these distinctions can help you choose which type of organization to create or support. Both types of organizations are established to serve a mission, and any revenue generated must be used to further that mission, rather than for the benefit of the organization’s members or shareholders.
Table difference between a non profit and a not for profit
| Nonprofit | Not-for-profit | |
|---|---|---|
| Definition | A type of organization where any profit made is reinvested back into the organization to further its mission | A type of organization where income is not distributed as profit to owners or shareholders, but is instead used to further the organization’s mission |
| Tax Status | Recognized by the IRS as tax-exempt | Not automatically recognized by the IRS as tax-exempt, but can apply for tax-exempt status |
| Ownership | Owned by a board of directors or trustees who are responsible for governance and decision-making | Owned by members or stakeholders who have a say in decision-making |
| Revenue Sources | Rely primarily on donations, grants, and fundraising events for revenue | Rely on a variety of sources for revenue, including donations, grants, and earned income from products or services |
| Mission | Focuses on a specific cause, such as environmental conservation, education, or social justice | Can have a wide range of missions, including social, artistic, educational, and religious |