Nonprofit and not for profit are different terms representing different organizations. A Non-profit organization is a distinct valid body accepting donations. It, yet, is exempted to pay income tax because it is structured to offer charitable services.
These organizations have to make their operations universal plus their financial status. This is to enable donors to know their funds have been used well.
Not-for-profit is an organization that operates, obtains interest but cannot divide the gains. Still, it cannot receive any grant because it is not a distinct establishment. Besides, it is not a tax-exempt more willingly it has set out justification. Not for profit organizations are distinctive relief. They do not make gains from their proprietor.
Non-Profit vs Not for Profit
The main difference between Non-Profit and Not for Profit is simply their reason for formation. Deliberately, Non-Profits are build to serve the welfare of the public. In comparison, achieving the organizational aspirations of the owner is abides by the, not for profits. Of which non-profits can own their autonomous authorized agency. On the other hand, not for profits does not possess any such jurisdiction.
Comparison Table Between Nonprofit and Not for Profit (in Tabular Form)
| Parameter of comparison | Non-Profit | Not for Profit |
|---|---|---|
| Definition | They work to promote any charitable goal | They don’t distribute gains to owners but they exist to meet organization target. |
| Scope | These organizations have a wide scope | They have a relatively less scope |
| Legal Entity | They have an independent legal entity. | They cannot have the position of a different legal entity |
| Type of Organizations | They are involved in charity, religion, education, science, art, or research purpose. | Example of these organizations includes a sports club, women club or an association. It is formed by a group of people |
| Scale | Non-profit are larger than not for profit organizations | On the whole scale, they are smaller than non-profit organizations. |
| Employee Payment | They have volunteers and not full-time employees. | They have full-time employees whose salaries are paid first. The remaining revenues are put back in business |
| Charter | Non-profit organizations receive Charters at state levels | Non-for-profit organizations are not chartered either at the national or state level. |
| Accounting Standards | Non-profit accounting standards are strict. This is because they need to show how they spend the funding | The accounting policies aren’t that tough because is not a must for them to report revenues. |
| Sources of Revenue | They get their proceeds from donations, membership fees, fundraising and funds | Deal, interest, gains, add to the money and are not grants. |
| Tax-Exempt status | The non-profit organizations fall under the tax-exempt status. It is because they operate as businesses and targets to make profits. The gains help in running their operations and keeping their goals. They do not maintain any member | Not-for-profit is not certified under any removal of a liability status in the US. Authorities define these organizations as small groups whose center of attention is on any special interest like sports do not qualify as any business. |
What is Non-Profit Organization?
These are organizations that run without the aim of making a profit. They are given tax-exempt level. They are often known as NGOs. In other words, they work for any form of a charitable goal.
In India non-profit are licensed under section 8 of the Indian Companies Act. They have limited liability.
The goals of these organizations are not limited to promoting art, science or other areas.
For an organization to be classified as nonprofit, it should not prioritize dividends. It should work to achieve the objectives of the group and its charitable objectives.
These establishments have to promote some communal interest.
What is Not for Profit Organization?
Not-for-profit organizations do not give out gains to its owners and shareholders. It instead invests the profits back to business and its enterprise.
Not-for-profit organizations include clubs such as sports clubs. These clubs host fundraising events to push up money for a particular reason.
Some organizations under this category are given tax-exempt status under section 501 (a) of the IRC (Internal Revenue Code). But the company needs to apply for 501 (c) (3) statuses from IRS to get this.
Not-for-profit organizations do not have to sell taxes or pay property. It invests the donations received and money raised back to business.
Main Differences Between Nonprofit and Not for Profit
- Not for profit are not tax-exempt and cannot form a separate legal entity. Non-profit have relief from tax and can form a discreet organization.
- Non-profit organizations have strict accounting policies. They have to explain where they have used the funding. Not for profit have reduced laws to accounting. They don’t have to report their revenues to the public.
- Non-profit operate for charitable reasons. Not for profit are groups formed because they have a common interest.
- Non-profit organizations increase their revenues through charity and fundraising. Not for profit, on the other hand, increase their revenues by sales and profits.
- Non-profit organizations employ a lot of people. Not for profit organizations are the opposite.
- Non-profit organization gains are used to offset expenses to meet the stated goals. No profits are used for personal gain. They have volunteers who execute the duties of the organization. Not for profit does not focus on making proceeds. It uses the revenue it gets to pay off the salaries of the employees. The remaining amount is invested back in business. It has no shareholders.
- Non-profit organizations are more common than not for profit.
- Non-profit provides the local community with helpful services compared to not for profit.
Conclusion
The two organizations have differences but again in certain ways, they are alike. The main similarity between the two is they are not working intending to make a profit.
One fact you need to know is that non-profit organizations may, or can work as a, not for profit organization. Not for profit organization cannot whatsoever operate as a non-profit organization.
The wider spectrum of these organizations is to work for the betterment of human beings. They don’t work to earn profits rather improve the wellness of the society.
To improve society at large, citizens need to contribute and push these organizations.
References
- https://www.nber.org/papers/w6810.pdf
- https://www.nber.org/papers/w8921
- https://pdfs.semanticscholar.org/9269/d324d2a63d93c6261c43499bf97fd4d6e99e.pdf
- https://www.tandfonline.com/doi/abs/10.1080/09645290801977017