Non profit vs not for profit organizations are two entirely different organizations that not a lot of people know of. Normally, people think of the two terms as the same organization. However, in reality, the two terms stand for two very different types of organizations. Both respective terms have their fair share of differences as well as similarities. Given the fact that so many non-profit organizations are operating in the US, it can be a bit hard to differentiate between the two.
As per research conducted by the National Center for Charitable Statistics (NCCS), “The U.S. currently has well over 1.8 million non-profit organizations registered.”
So, with such high numbers, it’s more than likely you’ll come across one. Even though neither organization makes money, they work differently in terms of the purpose they serve. More so, both have differences in business structure. And as far as tax implications are concerned, that varies, too. That is why this blog will discuss the differences and similarities between the two organizations that can help you identify nonprofit and not for profit organizations. So, without further ado, let’s get started.
What is a Nonprofit Organization?
Nonprofit organizations are the ones that people usually associate with the two terms, which are charity foundations, educational, religious, and medical organizations. They exist to benefit the public and serve the public good while making sure no individuals or business entities profit from the revenue earned. Nonprofit organizations are similar to profit businesses as they earn revenue much like normal businesses. However, unlike for-profit businesses, they use that revenue for their mission, which is support to a good cause.
Nonprofit organizations are typically in Favour of using the money to benefit the greater good of people, as opposed to a single individual. These organizations do not turn a profit, and the funds they earn are through donations as well as grants and financial funding. These types of nonprofit organizations include charities and other related foundations. More so, these organizations work for many humanitarian-wellbeing causes and range in sectors like education, religion and healthcare.
These type of organizations operate for the public benefit, and they generate profit by the means of online fundraising and nonprofit donations, which helps run the organization. As for staff, they are run by volunteers who work towards the same mission as the organization, which is to help those in need. Their missions include giving shelter to those without a roof over their head, finding cures for diseases, or looking after animals that are in dire need of a human’s help.
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Examples of Nonprofit Organization
The example of a not-for-profit organization are as follows:
- UNICEF
- Make-a-Wish Foundation
- Feeding America
- Save the Children
- World Wide Fund
- Habitat for Humanity
- Nomi Network
- Healthcare for the Homeless
What is a Not-for-Profit Organization?
Not-for-profit organizations, just like nonprofit organizations, do not earn profits for their owners. But that does not rule out that they can’t earn profits to benefit their members. Not-for-profit organizations may use the profit for their own benefit as they do not have to serve the public good. However, these organizations rely on the money they receive in order to keep them running. Not-for-profits organizations range in social as well as community organizations and clubs. Community organizations look to support causes within the community, whereas social organizations work towards helping and improving the lives of the homeless.
Social organizations also support retired veterans as well as their families. However, common issues found within a community are all looked into by community organizations. These issues include roads that need fixing or cleaning, renovating a park or, for that matter, planting more trees. While both of these organizations work for the special interests of others, clubs, however, raise funds to improve their own activities.
Many churches also work as a not-for-profit organization as they raise funds with donation kiosks to help the people of their community. Linkitsoft, being a leading kiosk software developer and provider, makes software for church donation kiosks that makes the kiosk smart. So, if any church member or donor is looking to upgrade their church’s donation kiosk, they can seek out Linkitsoft’s smart kiosk software solutions.
Examples of Not-for-profit Organization
- College fraternities and sororities
- Sports clubs like a travel baseball team
- Boys & Girls Clubs of St. Lucie County
- Extended Families
- The Vitiligo Research Foundation
- The Equitable Rights Movement
Key Differences Between Nonprofits and Not-for-profit Organizations
There are many differences between nonprofit and not-for-profit organizations. However, the major differences between nonprofit vs not-for-profit organizations are listed as follows:
1. Mission and Purpose
The purpose and mission of nonprofit and not-for-profit may vary from organization to organization. However, in profit terms nonprofit organization tend to fully use those profits in humanitarian and social causes. Those causes include feeding hungry people, providing clean drinking water, cleaning up roads and building educational sectors. Nonprofit organizations do earn revenue as opposed to raising funds to carry out this work.
And after earning revenue, they do not turn a profit under any circumstance whatsoever. As for not-for-profit organizations they are not required to serve the public. These organizations raise funds not quite like a nonprofit does. However, these organizations only do it to fulfil their mission as well as to serve and benefit the members of the community. That is the main difference between a not-for-profit vs non profit organization.
2. Fundraising and Tax-Exempt Status
Nonprofits and not-for-profit organizations do not pay taxes. All nonprofit organizations are given tax exemptions if they apply for tax-exempt status with the Internal Revenue Service (IRS). Upon approval, all nonprofits receive a 501(c)3 status. However, not every not-for-profit organization is given one as not-for-profit organizations fall under a variety of other 501(c) tax codes. Moreover, any donation made to an organization that is registered 501(c)3 is applicable for a tax deduction, which gets deducted from the donor’s income tax. That way, 501(c)3 not-for-profit organizations cannot be given tax exemptions.
3. Charitable causes
At the end of it all, these non-profit and not-for-profit organizations, as well as charitable organizations, work for a social cause. They aim to make the world a better place for everyone in it. Neither organization exists to earn profits for owners. However, they do go a different way about spending that profit. For instance, non profit organizations, work for causes outside their community, such as feeding the hungry and providing shelter to the homeless. As for not-for-profit organizations, they serve the social cause and help people within their community only.
Non-profit Vs Not-for-profits Vs For-profit Organization
If you are wondering what’s the difference between a nonprofit and a for-profit then let us break it down for you. The former organization works for a social cause and the betterment of the world, while the latter works for the organization’s self-interest. Another difference between for-profit and nonprofit organizations is that a for-profit business is required to pay staff, who earn profits for owners. At the same time, nonprofit or not-for-profit organizations operating in the US do not have to pay the workers, as they are volunteers.
Nonprofit organizational profits and revenue are not applicable to taxes and many not-for-profit organizations may also be given a tax exemption. However, the profits of for-profit companies are eligible for tax deductions. That is why the board of directors, shareholder or business owners of for-profit organizations must pay income tax to keep running a business. Every for-profit corporation is eligible to pay taxes on a regular basis. Even if they are merely property taxes, organizations pay them from time to time.
Other than that, a nonprofit conversion requires some doing. Converting a for-profit business or professional organization into a new nonprofit organization in the United States requires more than just filing to become tax-exempt. It requires a proper legal procedure that the organization may need to abide by. This is the reason why not many for-profit organizations are able to convert into nonprofit organizations.
Final Thoughts:
Whether it is non profit vs not for profit, at the end of the day, both organizations serve and help people in need. With this blog, we hope to tell you the differences between the two organizations so that you can identify nonprofits and not-for-profits. While nonprofit organizations earn revenue, not-for-profit ones raise funds through various means, including kiosk machines.
The kiosk could be in a church or earn donations in a mosque with masjid kiosks; the end goal is to serve people. Much like these social organizations, Linkitsoft aims to help these kiosk machines work as intended by providing them with smart software solutions. The software allows for donations to the organization to be carried out successfully and securely.
