Overview of Not-for-Profit Organizations
A not-for-profit organization does not generate profit for its owners. All money generated must be reinvested to run it. Unlike nonprofits, not-for-profits are not required to operate for public benefit or a social cause. A not-for-profit can serve the goals or interests of its members. For example, a sports club.
Tax-exempt Status and Financial Operations
Not-for-profits apply for tax-exempt status from the IRS. Money donated to a not-for-profit cannot be deducted on the donor’s tax return. Both enjoy tax-exempt status but have differences in scope and community service.
Characteristics and Examples
A not-for-profit sets goals and uses business strategies like a for-profit. But a not-for-profit exclusively operates as a charity or for science, religion or public safety. A for-profit can participate in many activities.
Income is not distributed to a not-for-profit’s members, directors or officers. All money goes back into running it. Well-known examples are the Red Cross and Salvation Army.
Not-for-profits provide service at a lower cost than for-profits. Fees charged for the same service will be higher at a for-profit organization. Income generated goes back into the not-for-profit’s primary purpose.
Types of not-for-profits include private charities, government created ones and beneficiary societies. They may enjoy benefits like tax exemption and deductible donations.
Starting a Not-for-Profit Organization
Anyone can start a not-for-profit. First identify a need to serve in religion, science or education. Research the issue thoroughly. Then address the need.