What is the Difference Between Non Profit and Not For Profit?

The terms "nonprofit" and "not-for-profit" are often used interchangeably, but they have distinct differences. Both types of organizations share some similarities, such as not earning profit for their owners and funneling revenues back into their operations or mission. However, there are key differences between nonprofit and not-for-profit organizations:

1. Purpose: Nonprofits are formed explicitly to benefit the public good, while not-for-profits exist to fulfill an owner's organizational objectives or serve their members.
2. Legal Entity: Nonprofits can have a separate legal entity, whereas not-for-profits cannot have a separate legal entity.
3. Tax Status: Nonprofits are granted 501(c)(3) status by the IRS, making donations to the organization tax-deductible for donors. Not-for-profit organizations, while also governed by section 501c of the tax code, could fall under a different section, such as 501(c)(7) for recreational organizations.
4. Financial Reporting: Nonprofit organizations must make their finances public, reporting their activities, governance, revenue, expenses, and assets. Not-for-profit organizations do not have the same disclosure requirements.
5. Examples: Nonprofits include charities, foundations, educational, religious, and medical organizations, while not-for-profit organizations support business or professional associations or social clubs and exist purely for the benefit of their members.

In summary, nonprofit organizations focus on serving the public good and have a separate legal entity, while not-for-profit organizations serve their members and do not have a separate legal entity. Both types of organizations enjoy tax-exempt status, but only donations to nonprofits are tax-deductible for donors.

Comparative Table: Non Profit vs Not For Profit

Here is a table comparing the differences between non-profit and not-for-profit organizations:

Non-profit organizations are formed explicitly to benefit the public good and can have a separate legal entity. They apply for tax-exempt status from the IRS, and donations made to them are tax-deductible for the donor. Non-profit organizations rely on donations, fundraising, membership dues, and funds for their sources of revenue.

On the other hand, not-for-profit organizations exist to fulfill an owner's organizational objectives and cannot have a separate legal entity. They do not apply for tax-exempt status, and their operations and profits are not tax-exempt. Not-for-profit organizations generate revenue from sales, profits, and membership fees, and their financial reporting is less rigorous compared to non-profit organizations.