what does not for profit mean 
not for profit organizations do not earn profits for their 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 income is not distributed to the group s members directors or officers typically organizations in the nonprofit sector are tax exempt charities or other types of public service organizations as such they are not required to pay most taxes some well known nonprofit organizations include the american red cross the united way and the salvation army there are also nonprofit corporations known as nonstock corporations which are usually formed for such purposes as clubs rescue squads and religious and charitable organizations charitable purposes of a not for profit organizationif someone sees a need in their community or elsewhere in the world they can research their idea and put together a business plan outlining the proposed nonprofit s objectives and how it plans to meet those goals almost anyone can start a not for profit group and apply for tax exempt status but many not for profit organizations won t qualify for 501 c 3 status as it is only for charitable organizations not for profit organizations can be social clubs that exist to serve their members social welfare organizations civic leagues labor organizations and business leagues these would be tax exempt but not 501 c 3 1most not for profit organizations fall into one the following categories activities of not for profit organizationsnot for profit organizations often classify their activities in one of the three ways fundraising program and administrative the fundraising activities of a not for profit may range from public major events to more private smaller fundraising opportunities not for profit organizations may also solicit direct donations sell products or rely on major gifts these funds are used to pay for the two remaining types of activities first most of the fundraised funds should go to the not for profit s program this is the mission it was created to serve and money is spent to help solve the problem that caused the nonprofit to be formed in the first place funds are also used to pay for administrative expenses for example some back office functions like a bookkeeper are not directly related to offering program services however a bookkeeper is an essential part in maintaining the reporting requirements necessary to remain a not for profit for this reason not for profits often must spend at least a small portion of donations on expenses not directly tied to their mission not for profit and taxesto achieve tax exempt status the organization needs to request 501 c 3 status from the internal revenue service irs 2 to qualify the organization s purpose must be one of the following charitable religious educational scientific literary testing for public safety fostering national or international amateur sports competition or preventing cruelty to children or animals 3if desired a not for profit organization can also opt to incorporate once registered and running it has to maintain compliance with the appropriate state agency regulating charitable organizations 4thanks to their tax exempt status not for profit organizations are not subject to most forms of taxation including sales tax and property taxes in most cases only donations made to nonprofit 501 c 3 organizations are tax deductible not for profit organizations can be social organizations sports clubs etc without a charitable purpose so even if they are tax exempt donations might not be tax deductible for donors for example if a church is established as a not for profit organization it does not pay property taxes on the house of worship that it owns similarly if a not for profit charity accepts clothing donations sells the clothing and uses the money for its charitable purposes it does not pay property tax on the building that it uses as its store however not for profit organizations must remit payroll taxes on behalf of their employees 5 similarly the employees and directors who receive income from a not for profit organization must report the income to the irs for profit vs not for profitaside from the distinguishing feature that a not for profit organization does not distribute profits to its owners many nonprofits 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 sized ones are likely to require a staff of paid full time employees managers and directors indeed as 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 too finally while for profit businesses can engage in a huge range of activities not for profit businesses must operate exclusively as a charity or for scientific religious or public safety purposes 3 additionally not for profit organizations may exist to collect income to dispense to other qualifying charities 6even tax exempt not for profit organizations are required to remit payroll taxes on behalf of their employees who also must report income from nonprofits to the irs nonprofit vs not for profitboth nonprofits and not for profits exist to operate an entity that does not earn a profit for the owners of the entity both are often overseen by a board of directors and all money raised by the entity are spent either on supporting the entity s mission and programmatic goals or used to support the administrative costs of running the entity not for profit organizations vary from nonprofits in that they often may not offer a broad public benefit instead not for profit organizations may exist to serve the best interest for a select few consider the example of a private sports club this club s purpose is not to better the entire community but a select subset of community members this organization may still be formed in a way to capitalize on favorable irs legislation however they are not formed for the explicit benefit of the public good in addition nonprofits may have a different legal structure nonprofits can have a separate legal structure while not for profit organizations can not nonprofits often operate to maximize the net proceeds collected to then be spent on the mission while not for profit organizations may simply exist to provide a non financial benefit last not for profit organizations are often run by volunteers whereas non profits are more likely to have paid staff common problems that not for profits encounterin a survey of nonprofits in the united states and canada released by the nonprofit research collaborative in 2019 staffing was the biggest problem encountered by those surveyed 18 identified challenges managing transitions in staff and the staff being too small salaries of course are generally higher in the for profit world the next most common problem at 11 was with donors their cultivation acquisition and retention as well as communications with them tying for third place at 10 was the state of the economy and the concomitant national mood and the impact of tax laws 7organizational issues involving boards leadership fundraising and budgeting clocked in at 9 while local issues especially too many nonprofits competing for funds and problems with articulating a mission or purpose and creating programs to fulfill it tied at 8 other concerns included starting and ending campaigns changing demographics and government funding 7one problem not specifically mentioned in the survey it would fall under the rubric of organizational issues is what is termed founder s syndrome according to the maine association of nonprofits 8 this happens when the founder of a nonprofit organization resists changes necessary to keep the group alive and thriving the founder may have assembled a like minded board when starting the organization but as time passes and board members change different ideas about what the group should be doing and how to go about it may arise especially when external forces present new challenges if a founder is trying to preserve their original vision when the organization needs to grow and change founder s syndrome has set in as the board not the founder is responsible for running the show this can lead to the difficult step of replacing the founder when compromise proves impossible can a not for profit organization make money yes in the sense that it can seek donations to fund its operations and may end up with a surplus of money in its coffers at the end of the fiscal year however all of that money eventually must be used to fund the organization s operations it cannot be distributed to the organization s owners as profit 