The A to Z of Not for Profit Organizations

What is ‘Not For Profit’
Not for profit describes a type of organization that does not earn profits for its owners. All of the money earned by or donated to a not-for-profit organization is used in pursuing the organization’s objectives and keeping it running. Typically, not-for-profit organizations are charities or other types of public service organizations.

BREAKING DOWN ‘Not For Profit’
Not-for-profit organizations can apply for a tax exempt status so the organization is not subject to most forms of taxation. Donations made to a tax-exempt, not-for-profit organization may also be tax deductible for the donor.
Differences Between Businesses and Not-for-Profit Organizations
Aside from the distinguishing feature that a not-for-profit organization does not distribute profits to it owners, many non-profit organizations have much in common with for-profit organizations. For example, while some not-for-profit organizations use only volunteer labor, many large or even medium-size non-profits are likely to require a staff of paid full-time employees, managers and directors. Indeed, since not-for-profit enterprises wish to accomplish their objectives in the same way as for profit enterprises, business tactics and management techniques honed in the for-profit world often work well in not-for-profit organizations as well.

Finally, while for-profit businesses can engage in a huge range of activities, not-for-profits must operate exclusively as a charity or for scientific, religious or public safety purposes. Additionally, not for profits may also exist to collect income to dispense to other qualifying charities.

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