Show Profit is the primary motive for most organizations. But, not every organization works for profit. Some organizations work with the aim of rendering services to their members and the public as a whole. These are charitable institutions, religious organizations, clubs, hospitals, trade unions, foundations, welfare societies and so on. Non-Profit Organizations and Not for Profit Organizations sound similar. But they are different. Both the organizations do not operate with the aim of making a profit. However, the income they generate from the business help in sustaining their mission. While a non-profit organization return the additional income earned to the organization. Not for Profit organizations generally pay remuneration to the members who work for the organization, from the income generated. In this post, we will talk about the differences between non-profit and not for profit organizations.
Comparison Chart
What is a Non-Profit Organization?A non-profit organization is a form of organization that serves the public good. It has a separate legal identity. Also, they accept donations. Because they are set up for charitable causes, they get the benefit of tax exemption. These organizations are dedicated to promoting the public good and use all their resources for charitable purposes only. These organizations avoid the distribution of profit, except for the expansion of the organization. They have to publicly disclose financial and operating information. With this information, the donors will get an idea of – how their funds are invested. Non-Profit Organizations can be established for any legal purpose be it:
The organization may accumulate profits in a financial year. However, it should reinvest the profits into its primary objective. That means it should not distribute profits to the members, owners, founders, or promoters. In short, these organizations are not mainly influenced by commercial goals and considerations. The non-profit sector is the third sector that comprises private, voluntary and non-profit organizations and associations. Purposes of Formation of Non-Profit OrganizationThe missions of different NPOs are different. Here, we will discuss the various purposes of the formation of a Non-Profit Organization:
Example
What is Not-for-Profit Organization?Organizations which do not earn profit for their owners from the funds collected by providing services is a not-for-profit-organization. Owners of such organizations include some charitable organizations or non-profit corporations. Because these organizations are not operating for profit, the fees for rendering services are lower in comparison to for-profit organizations. This means that the fees charged for the same service by an organization which works for profit will be more. Also, the income generated from the fees collected is plowed back for its primary purpose. These organizations exist in both the public and private sectors. How do Not-for-Profit organizations generate income?Income is generated through:
Do they earn a profit?They do earn profits, i.e. when their revenues are more than the expenses in an accounting year. Receipt of money in the form of donations or through business operations is utilized for running the organization. They exist to serve the goals of their members. This implies, that these organizations are founded with the objective of promoting commerce, art, science, religion or charity. In short, they are formed for the welfare of the society and are established as charitable organizations, with a service motive. The provision of service is either to a specific group or to the public at large. Besides, some not-for-profit organizations are also set up to provide social activities. So, the aim is not to make a profit. However, the organization has the potential to earn profit. They aim to spend their income on the promotion of objectives. It prohibits dividend payments to the members. ExampleAzim Premji Foundation. Its founder is Azim Premji in the year 2001. Its headquarters are in Bengaluru, India. Key Differences Between Non-Profit and Not-for-Profit OrganizationsThe pointers given below will explain the difference between non-profit and not-for-profit organizations:
ConclusionAbove all, there are some organizations which work to serve, help or support the weaker sections of the society. Further, they comprise members who work selflessly to promote the cause. The cause may range from feeding the underprivileged to educating the illiterate, from saving lives to conserving of environment. The management of these organizations is in the hands of a group of persons. We call such a group a managing committee. |