NPO
There are many organizations and charities working to help people or communities in need. This type of organization is generally considered a non-profit. Read on to learn what a non-profit organization is and how a non-profit organization differs from a non-profit organization.
What is a non profit organization?
Nonprofit organizations do not make any profit for their owners. Instead, the organization contributes the money it receives to help fund the goals and objectives of the organization. The nonprofit may also use donations received to keep it operating.
In most cases, nonprofits are tax exempt, meaning they are not required to pay most taxes. However, businesses are not automatically excluded.
To obtain tax-exempt status, you must file it through the IRS. Qualified nonprofit organizations can apply for 501(c)(3) status to be exempt from federal income tax.
For profit vs Not for profit
The main difference between profit and non-profit is how the organization handles its profits. Distributes profits to a non-profit organization or business owners.
While they may differ in how they handle profit, profit and non-profit have some things in common. Typically, nonprofits use the same business strategies and techniques as nonprofits. Both organizations set goals and seek to achieve them.
A nonprofit business can participate in a wide variety of activities. On the other hand, a non-profit organization must operate exclusively as a charity or for scientific, religious or public safety purposes.
Not-for-profits vs. Nonprofits
Many people mistake not-for-profits and nonprofits to be the same thing. However, they are not. Take a look at the differences between nonprofit and not-for-profit services below.
Organization’s purpose
Not-for-profit: Supports a cause, activity, or the community
Nonprofit: Supports charitable, educational, or religious purposes
Uses of profits
Not-for-profit: Funds activities, hobbies, and recreation related to their cause or goal
Nonprofit: Profits are used to support the organization’s cause or goal, but funds can also be used to pay for employee salaries and administrative need
Type of employees
Not-for-profit: Volunteers, paid staff, or a mixture of both
Nonprofit: Could have paid staff as well as paid volunteers
Tax-exemption availability
Not-for-profit: Yes (must be both state and federal levels)
Nonprofit: Yes (must be both state and federal levels)
Stock option availability
Not-for-profit: No
Nonprofit: No
Types of not-for-profits
There are a couple of different types of not-for-profits. Some examples of not-for-profit organizations include:
- Social organizations
- Community organizations
Social Organization
Social organizations try to enhance or fulfill social causes. These organizations can help the homeless, provide free legal services, or help veterans find jobs.
The income of social organizations usually comes from donations or profits from the sale of goods. Social organizations may use any profits to provide services to those in need or to fund the organization’s goals and operations (for example, supplies).
Community Organization
Most non-profit organizations are considered community organizations. They can range from small local groups to large agencies with branches across the country.
Individuals form community organizations to help causes around the community. Some causes community organizations can help include cleaning up the community, improving the environment, and promoting recycling locally.
