Julialt's List: nonprofit vs for profit

• The most fundamental difference between nonprofit and for-profit organizations is the reason they exist.
• For-profit companies are generally founded to generate income for entrepreneurs and their employees
• nonprofits are generally founded to serve a humanitarian or environmental need
• For-profit
• distribute profits between owners, employees, shareholders and the business itself.
• Sales revenue
• life-blood of for-profit organizations
• rely on earned income and credit arrangements with lenders and suppliers to finance their operations
• Nonprofits
• rely almost entirely on donations and grants from individuals, government entities and organizations
• income source determines, to a large extent, how the company can use its money
• nonprofits are expected to utilize their funding in a way that maximizes benefits to their targeted recipients
• for-profits earn their own income and pay their own debts, they have much more ethical leeway
• For-profit companies are taxed in a number of ways
• IRS treats the income from proprietorships and partnerships as personal income, and the owners are held personally liable for all business debts
• Nonprofit organizations can register for income-tax exemption under section 501(c)3 of the tax code
• Contributors to nonprofit organizations are offered tax incentives for their donations as well
• Hybrid Organizations
• Goodwill Industries
• Chick-fil-A
• For-profit companies are staffed with salaried and hourly employees, with the occasional unpaid intern
• Workforces look quite different between for-profit and nonprofit organizations
• Nonprofits
• small workforce and a large corps of volunteers

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• If you are thinking about becoming a non profit corporation, enjoying tax exempt  status let’s look at the advantages and disadvantages.
• what is a corporation?
• two types of corporations
• non profit is intended to further a purpose
• for profit is intended for the benefit  of its owners
• corporation acts as a separate  “person” and makes the contracts, pays the taxes, incurs the debt and protects  the individuals involved from being personally liable
• If  you qualify as a 501(c)3, this eliminates your federal and state income taxes,  sales and use tax
• ou have to apply for, and be granted property tax exemption
• As a non profit, you are eligible for both private  and government grants.
• lower costs
• if you’re a  501(c)3 status. Any contributions made to you if you have that status allows  your contributors to deduct their contribution from their taxes
• deductibility of contributions
• so called “halo effect”
• public is more willing to  offer money or time or do business with a nonprofit because of a real or  perceived view that your organization is founded and operated in the public  interest
• Certain types of non profit organizations can  go into any neighborhood without concern about the zoning requirements
• disadvantages
• loss of control The non profit organization is not  “owned” by its founders
• If it dissolves, its assets must be given to another nonprofit  organization with a purpose similar to yours. If its assets are misapplied or  used for private benefit by the officers, they can be seized.
• Even in the smallest  non-profit corporation, the paperwork load related to corporate status can at  times be overwhelming
• paperwork, paperwork, paperwork
• limited purposes You can only perform certain functions  listed under the law. You may be forbidden from contributing to political  campaigns and may only do a limited amount of lobbying.
• public scrutiny
• your finances are open to public inspection
• constant  challenge to the non profit status, whether it’s over tax exempt property, the  sale of goods and services that compete with the for profit sector, or for  profits moving in on your territory.
• differences between nonprofit charitable organizations and for-profits
• nonprofit is driven by its service mission philosophy rather than by the  profit motive
• nonprofit serves those who cannot afford to pay full costs
• Excess revenue over expenses is used to further the organization’s exempt  purpose
• nonprofit is more accountable to its board
• nonprofit may not compensate its employees higher than reasonable” rates

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