Nonprofit vs. Not-for-Profit vs. For-Profit: What's the Difference? These terms have different implications for your taxes, corporate governance and business activities.
What is a nonprofit organization? A nonprofit organization is one that qualifies for tax-exempt status by the IRS because its mission and purpose are to further a social cause and provide a public benefit. Nonprofit organizations include hospitals, universities, national charities, and foundations.
To qualify as a nonprofit, your business must serve the public good in some way. Nonprofits do not distribute profit to anything other than furthering the advancement of the organization. As such, you will be required to make your financial and operating information public so that donors can see how their contributions are being used. An individual or business that makes a donation to a nonprofit is allowed to deduct their donation from their tax return. The nonprofit, likewise, pays no taxes on any money received through fundraising.
What is a not-for-profit organization?Similar to a nonprofit, a not-for-profit organization (NFPO) is one that does not earn profit for its owners. All money earned through pursuing business activities or through donations goes right back into running the organization.
However, not-for-profits are not required to operate for the benefit of the public good. A not-for-profit can simply serve the goals of its members. A good example is a sports club—the purpose of the club is to exist for its members’ enjoyment. These organizations must apply for tax-exempt status from the IRS, including exemptions from sales tax and property taxes. That also means that money donated by an individual to an NFPO cannot be deducted on that person’s tax return.
Nonprofit vs not-for-profit organizationsThere are four key differences between a nonprofit and a not-for-profit:
What is a for-profit organization?A for-profit organization is one that operates with the goal of making money. Most businesses are for-profits that serve their customers by selling a product or service. The business owner earns an income from the profit and may also pay shareholders and investors from the profits.
Whether you decided to start a for-profit, not-for-profit, or nonprofit, the first steps to creating your entity are the same. Start by filing for a business entity in the state in which you wish to run your operations. Your business entity might be a corporation, LLC, sole proprietorship, or partnership.
Once the entity has been formed, you will apply for an Employer Identification Number (EIN) with the IRS. It’s during this step that you will select your tax-exempt status using Form 1024 if you wish to run as a nonprofit.
What is a nonprofit organization? A nonprofit organization is one that qualifies for tax-exempt status by the IRS because its mission and purpose are to further a social cause and provide a public benefit. Nonprofit organizations include hospitals, universities, national charities, and foundations.
To qualify as a nonprofit, your business must serve the public good in some way. Nonprofits do not distribute profit to anything other than furthering the advancement of the organization. As such, you will be required to make your financial and operating information public so that donors can see how their contributions are being used. An individual or business that makes a donation to a nonprofit is allowed to deduct their donation from their tax return. The nonprofit, likewise, pays no taxes on any money received through fundraising.
What is a not-for-profit organization?Similar to a nonprofit, a not-for-profit organization (NFPO) is one that does not earn profit for its owners. All money earned through pursuing business activities or through donations goes right back into running the organization.
However, not-for-profits are not required to operate for the benefit of the public good. A not-for-profit can simply serve the goals of its members. A good example is a sports club—the purpose of the club is to exist for its members’ enjoyment. These organizations must apply for tax-exempt status from the IRS, including exemptions from sales tax and property taxes. That also means that money donated by an individual to an NFPO cannot be deducted on that person’s tax return.
Nonprofit vs not-for-profit organizationsThere are four key differences between a nonprofit and a not-for-profit:
- Nonprofits are formed explicitly to benefit the public good; not-for-profits exist to fulfill an owner’s organizational objectives.
- Nonprofits can have a separate legal entity; not-for-profits cannot have a separate legal entity.
- Nonprofits run like a business and try to earn a profit, which does not support any single member; not-for-profits are considered “recreational organizations” that do not operate with the business goal of earning revenue.
- Nonprofits may have employees who are paid, but their paychecks do not come through fundraising; not-for-profits are run by volunteers.
What is a for-profit organization?A for-profit organization is one that operates with the goal of making money. Most businesses are for-profits that serve their customers by selling a product or service. The business owner earns an income from the profit and may also pay shareholders and investors from the profits.
Whether you decided to start a for-profit, not-for-profit, or nonprofit, the first steps to creating your entity are the same. Start by filing for a business entity in the state in which you wish to run your operations. Your business entity might be a corporation, LLC, sole proprietorship, or partnership.
Once the entity has been formed, you will apply for an Employer Identification Number (EIN) with the IRS. It’s during this step that you will select your tax-exempt status using Form 1024 if you wish to run as a nonprofit.
for profit businesses Grants:
Rural Areas grant |
Minority - Owned |
General Grants |
Female-Owned Grants |
Agriculture-Related |
Tax Credits |
More Tax Credits |
Government Grants |