Key differences exist between non-profit and not-for-profit organizations. Non-profits work for charitable purposes, while not-for-profits are small groups formed for some common interest.
When you’re starting a business, it’s likely you’ll hear the phrases “nonprofit” and “not-for-profit” used interchangeably. However, nonprofits and not-for-profits are structures with different tax implications, governance, and functions.
What qualifies as a not-for-profit?
A “nonprofit” is an organization that does not operate to make a profit. Nonprofits, also called NGOs, work for a charitable purpose like promoting commerce, art, science, or public service.
Not for profits do fundraising, programs, and administration. Fundraising includes events, donations, selling goods, and major gifts to pay for programs and administration.
Both nonprofits and not-for-profits differ in taxes, governance, and functions.
A nonprofit organization has tax-exempt status from the IRS because it furthers a cause and benefits the public. Examples are hospitals, universities, charities, and foundations. A nonprofit serves the public good.
Examples of for-profits are airlines, manufacturers, restaurants, and retailers. They earn profits for owners.
Not-for-profits also earn profits but don’t distribute them or take donations. They aren’t separate legal entities or tax-exempt. But they have specified purposes like community groups, sports leagues, business leagues like chambers of commerce, and college fraternities.