31 Jul Did You Know? Nonprofit Organizations and Not-For-Profit Organizations Are Not the Same Thing by Roxanne Jensen, Ed.S., GPC

Nonprofits and not-for-profits share many similarities and, in practice, the terms are often used interchangeably. The key similarities and differences between these types of organizations are nuanced.

Nonprofits and not-for-profits are mission-driven organizations with a shared purpose of serving the public or charitable needs. They are committed to making a positive impact, contributing to the betterment of others, and fulfilling specific missions. Both types of organizations actively work towards creating a positive social impact, addressing societal issues, and improving the well-being of individuals and communities. While nonprofits are specifically dedicated to public benefit and advancing social causes, not-for-profits have the flexibility to serve the goals and special interests of their members.

Nonprofits and not-for-profits typically enjoy tax-exempt status, meaning they are exempt from paying certain taxes, such as income tax, on the funds they receive. This tax-exempt status encourages donations and contributions to support the organization’s charitable or public service activities. Nonprofits and not-for-profits are expected to operate with a high degree of accountability and transparency. They often need to provide public reporting on their financial activities and the impact of their programs. Neither nonprofits nor not-for-profits distribute profits to individuals or owners. Instead, any surplus funds generated through their activities are reinvested back into the organization to support its mission and activities.

However, while donors to nonprofits can deduct their gifts on their annual tax return, individuals who give money to a not-for-profit are not entitled to tax deductions. Nonprofits are also subject to stricter tax scrutiny than not-for-profit organizations. Nonprofits run with the purpose of maximizing revenues for the causes they support. Not-for-profits do not run with the goal of earning revenue. Not-for-profit organizations simply seek to generate enough money to maintain operations. Whereas for-profits may distribute revenues above the profit line to shareholders, nonprofits must recycle those earnings back into the organization. While nonprofits may have paid staff (often including a president or chief executive officer), not-for-profits are run by volunteers.

In conclusion, while nonprofits and not-for-profits share many similarities and are often used interchangeably, it is essential to recognize the key distinctions between these types of organizations.

AGS blogs, funding alerts, and trainings are aligned with the Grant Professional Certification Institute’s Competencies and Skills

Competency 2:4 Identify values, mission, and goals of your organization’s overall strategic plan as it relates to the grant process/grant seeking

Competency 2:7 Identify effects of applicants’ organizational cultures, values, decision-making processes, and norms on the pursuit of grant opportunities

Competency 3:3 Identify strategies for educating key personnel about financial and programmatic accountability to comply with funder requirements