The Difference Between Non-Profit and Not For Profit
Introduction
The terms “non-profit” and “not for profit” are often used interchangeably, but they actually mean different things. Understanding the differences between them is important for both organizations and individuals who want to support them.
Definitions
A non-profit organization is a type of organization that is established for a specific purpose other than making a profit. Non-profit organizations can still make money, but any money that is generated must be reinvested back into the organization to further their cause. Examples of non-profit organizations include charities, educational institutions, and religious groups.
A not for profit organization operates in much the same way as a non-profit organization, except there is no guarantee that they will not make a profit. Instead, any profits that are generated are used to further the organization’s mission rather than being distributed to shareholders or owners. Examples of not for profit organizations include trade associations, professional societies, and social clubs.
Tax Exemption Status
One of the main differences between non-profit and not for profit organizations is their tax exemption status. To qualify for tax-exempt status as a non-profit, organizations must meet specific requirements set forth by the Internal Revenue Service (IRS). These requirements include operating for a charitable, educational, or scientific purpose and not distributing any profits to individuals or shareholders.
Not for profit organizations, on the other hand, may or may not qualify for tax-exempt status. Instead, they may be subject to corporate income tax and other taxes depending on their activities and revenue.
Funding Sources
Because non-profit organizations are focused solely on their mission, they often rely on donations and grants to fund their activities. These donations can come from individuals, corporations, government organizations, and other non-profit organizations. Businesses and individuals who donate to non-profit organizations can typically deduct their contributions from their taxes.
In contrast, not for profit organizations may be funded by membership fees, grants, and sponsorships from corporations or individuals. Because they are not restricted by the same tax-exempt rules as non-profit organizations, they may also be able to generate income through fundraising events, product sales, and other activities.
Conclusion
In summary, the main difference between non-profit and not for profit organizations is their tax exemption status and their sources of funding. Understanding these differences is important for both organizations and individuals who want to support them. By knowing the difference, you can make informed decisions about where to direct your support and how best to align your values with the mission of the organization.
Table difference between non profit and not for profit
Unfortunately, as an AI language model, I cannot create a visual HTML table, but I can provide you with the information on the differences between non-profit and not-for-profit organizations in a tabular format:
| Non-Profit | Not-for-Profit |
| — | — |
| A type of organization that uses its surplus revenue to achieve its goals rather than distributing it as profit or dividends. | A type of organization that does not distribute profits or dividends to its members or owners, but may generate revenue to meet its expenses and achieve its objectives. |
| Generally organized for charitable, religious, educational or scientific purposes. | May be organized for various purposes such as social, cultural, environmental or political causes. |
| Can be structured as a corporation or a trust or a combination of the two, depending on the laws of the jurisdiction in which it operates. | Does not typically have a specific legal structure, but may operate as a corporation, trust or association. |
| May be eligible for tax-exempt status, which means they do not have to pay certain types of taxes, such as income tax, property tax or sales tax. | May or may not be eligible for tax-exempt status, depending on the laws of the jurisdiction in which it operates. |
| Examples may include charities, foundations, churches, and educational institutions. | Examples may include cooperative societies, trade associations, and advocacy groups. |